Meta Platforms Aiming for $3 Trillion Club by 2028 with AI Investments
The $3 trillion club remains exclusive. Since welcoming Apple as its first member in early 2022, only two additional companies have joined: Microsoft and Nvidia. Currently, Apple is the only company with a market cap exceeding $3 trillion.
However, Apple may not stay the lone member of this elite group for long. Analysts believe either Microsoft or Nvidia could see their stock prices increase sufficiently over time to re-enter the club, and several other contenders are vying for membership.
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All these companies share a common goal: to leverage advancements in artificial intelligence (AI). Major tech players are significantly investing in AI infrastructure and development, largely benefiting Nvidia, as they aim to break into the $3 trillion club.
Among them, one company stands out for its potential to capitalize on AI advancements across its products and services—Meta Platforms (NASDAQ: META). This company is investing heavily in AI, positioning itself as a strong contender for the $3 trillion club by 2028.
Image source: Getty Images.
Transformative AI Investments Fueling Meta’s Growth
Meta is set to dramatically increase its AI investments this year. Ahead of its fourth-quarter earnings report in January, CEO Mark Zuckerberg announced plans to allocate between $60 billion and $65 billion for capital expenditures this year—a 59% increase from the previous year’s midpoint.
Such heavy spending on AI is justified by the positive results Meta is already experiencing. Drawing from insights gained while developing large language models, the company refined its core recommendation algorithm. This led to more effective content suggestions, driving higher engagement on platforms like Facebook and Instagram, alongside more ad impressions.
Additionally, Meta reports that the value of its advertisements improved. The advanced recommendation algorithm has resulted in more relevant ads, while Meta’s AI tools are simplifying the ad creation process for marketers, enabling them to produce ads that yield better conversion rates.
As of late January, over 4 million advertisers utilized Meta’s generative AI ad creation features. Furthermore, average ad prices have risen by 14% over the past quarter while the company delivered more ads to users.
Importantly, Meta is just at the beginning of harnessing AI within its offerings. Zuckerberg envisions a future where an AI agent acts as a marketing director for businesses on Meta’s platforms. He stated during last year’s second-quarter earnings call, “Advertisers will basically just be able to tell us a business objective and a budget, and we’re going to do the rest for them.” This innovation could generate hundreds of personalized ads, targeting specific groups with tailored messages to boost conversions.
Meta could also enhance user-generated content through AI-generated translations on videos, enabling creators to reach broader audiences. In terms of monetization, AI is central to the company’s plans for WhatsApp and Messenger. The beta version of Business AIs will enable small businesses to create AI chatbots for customer service and sales, representing a potential $100 billion opportunity, according to analyst Ralph Schackart of William Blair.
Currently, Meta is focusing on various AI applications, including its Meta AI chatbot and Ray-Ban smart glasses. Growing engagement with these products presents additional monetization avenues for the company in the future.
Strong Growth Prospects Amidst Depreciation Challenges
Meta’s investments in AI put it on track for impressive revenue growth in the coming years. However, a significant increase in spending on data centers may soon impact earnings as depreciation costs become evident on the income statement.
Nonetheless, Meta may still experience substantial earnings growth as AI innovations and new products drive revenue at a pace that outstrips expense growth. With the influence of AI on its core business, the rollout of advanced AI across both ad creation tools and messaging platforms suggests that the benefits justify the investment costs. The AI chatbot is nearing its target of 1 billion users, a milestone at which Meta typically seeks to monetize products.
Importantly, Meta’s Reality Labs segment presents further profit potential. This division incurred a $17.7 billion loss in operating income last year; achieving break-even status here could elevate Meta’s total operating margin from 42% last year to over 50%.
If Meta achieves an average revenue growth of around 12% annually over the next five years, and maintains an operating margin of 44%, its operating income could rise by 84% in that timeframe. If this trend continues, and with a consistent tax rate, investors may value the company at approximately $3 trillion by the end of 2028, given a forward earnings multiple of 26 times.
Despite this potential, Meta currently trades at a relatively low valuation of 26 times forward earnings, especially compared to other AI stocks with higher earnings multiples. This suggests there is ample room for Meta to grow into the $3 trillion valuation. Even if the company faces fluctuations, strong revenue growth driven by its substantial investments in AI should instill confidence that it can join the exclusive $3 trillion club by 2028.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister of Meta’s CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Levy holds positions in Apple, Meta Platforms, and Microsoft. The Motley Fool recommends positions in and has investments in Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool also recommends options involving long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. A full disclosure policy can be found by The Motley Fool.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
