The Unparalleled Attractiveness of Meta Platforms for Investors
Amidst the stars of the investment galaxy, there’s one standout luminary that beckons investors to plunge headlong into its orbit: the social media behemoth, Meta Platforms.
Every public entity wades through rough patches, and Meta is no exception. An overriding concern for investors centers around the robustness of the U.S. economy. Last year, almost 98% of Meta’s $134.9 billion in revenue was generated from advertising. The advertising industry tends to react with hypersensitivity to economic downturns, with enterprises drastically curbing spending at the first sign of trouble. If certain economic indicators are on target and signal a U.S. recession, Meta could face turbulent waters.
But there’s a counterpoint to this narrative that prevails above all. Recessions, though inevitable and cyclical, are transient by historical yardsticks. Since the conclusion of World War II, only three recessions have stretched beyond a year, with none enduring beyond 18 months. Conversely, periods of expansion often endure for several years, markedly favoring ad-centric business models like Meta’s.
An Edgy Bet: Why Avoiding Nvidia is Wise in April
Regrettably, not every member of the vaunted “Magnificent Seven” promises a glittering future. The high-soaring standout to skirt vigilantly in April is the megacap virtuoso Nvidia.
Let’s not misconstrue the facts; there are sound rationales behind Nvidia’s near-$2 trillion surge in market value.
The Ups and Downs of Nvidia’s Future in the AI Market
Nvidia’s Dominance in the AI Market
With a staggering 217% increase in data center sales during the fiscal year 2024, Nvidia’s GPUs have indeed been a beacon for data centers grappling with mammoth AI solutions.
Challenges on the Horizon
Despite the recent boom, Nvidia’s future is far from guaranteed. The tide seems to be turning against the tech giant as several challenges loom large on the horizon.
Risks and Competition
As Nvidia ramps up production in the current fiscal year, the law of supply and demand may come knocking. Increased supply could lead to shrinking margins as scarcity-driven profits dwindle. Moreover, fierce competition is not just external but also from within. Nvidia’s top clients, including tech behemoths like Microsoft, Meta Platforms, Amazon, and Alphabet, are beginning to develop their own AI chips, potentially reducing their reliance on Nvidia.
Regulatory Hurdles
Regulatory interventions have also put a spoke in Nvidia’s wheel. Export bans on Nvidia’s top-tier chips, such as the A100 and H100, have hampered the company’s revenue streams. Even with toned-down versions like the A800 and H800, the export restrictions have cost Nvidia billions in quarterly sales.
The Uncertain Future of AI Investing
Finally, the capricious nature of investing in emerging technologies cannot be overlooked. History has shown that every ‘next big thing’ goes through an early-stage bubble, and AI may not be an exception. The exuberance around artificial intelligence might spell caution for Nvidia investors.
Should you invest $1,000 in Meta Platforms right now?
Before you buy stock in Meta Platforms, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
See the 10 stocks
*Stock Advisor returns as of April 1, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
