Morgan Stanley projects that four major companies — Microsoft, Amazon, Alphabet, and Meta Platforms (NASDAQ: META) — are set to invest a staggering $300 billion on data center infrastructure and chips in 2025. This spending is aimed at boosting their efforts in artificial intelligence (AI).
Cathie Wood, founder of Ark Investment Management, oversees several exchange-traded funds (ETFs) that focus on cutting-edge technology stocks. She asserts that software companies will capitalize significantly in AI, forecasting that they could earn $8 in revenue for every $1 spent on chips sourced from suppliers like Nvidia.
If Wood’s predictions hold true, these four tech giants stand to gain hugely from their investments in AI infrastructure. There’s a compelling reason for investors to consider purchasing Meta Platforms stock, in particular, by 2025.
Image source: Getty Images.
Meta’s Llama 4: Aiming for AI Supremacy in 2025
Meta, the parent company of popular platforms like Facebook, Instagram, WhatsApp, and Messenger, reaches around 3.3 billion users daily. AI technology significantly enhances user experiences on these apps.
The company has developed an AI-driven recommendation system that learns user preferences to tailor content on Facebook and Instagram. According to CEO Mark Zuckerberg, this initiative led to an 8% rise in user engagement on Facebook and a 6% increase on Instagram this year. More engagement means more ad exposure, boosting Meta’s revenue.
Meta is also rolling out new AI features such as Meta AI, a virtual assistant that can create images and text, and engage in group chats to settle discussions or suggest activities. The quality of this assistant relies heavily on its large language model (LLM), and Meta leverages a wealth of data from billions of social media posts to develop advanced LLMs, collectively named Llama.
While top LLMs from companies like OpenAI and Anthropic are closed-source, Llama is open-source. This openness allows countless developers to enhance its code, enabling Meta to fix bugs and improve its performance swiftly.
Currently, Llama 3.2 is in use, but Zuckerberg anticipates the launch of Llama 4 in 2025, and he believes it could become the most sophisticated model in the market, despite strong competition from startups like OpenAI.
Meta’s Proven Ability to Monetize Innovations
In the third quarter of 2024 (ending September 30), Meta reported a record revenue of $40.6 billion, largely generated from its advertising business. The company excels at developing new features and translating them into revenue.
Meta’s initial strategy to incorporate ads into user feeds captured users’ attention, but video formats like Stories and Reels have also become significant revenue sources, despite early competition from Snapchat and TikTok.
With over 500 million monthly active users, Meta AI is currently free, though the company expects future monetization opportunities. Advertisers may pay to have their products linked within relevant responses from Meta AI.
Furthermore, the launch of Business AI may enable businesses using Meta’s platforms to deploy personalized AI agents that can handle customer inquiries and transactions. Companies might customize these agents based on their offerings and branding, providing Meta with new revenue avenues, likely charging a fee per usage or through subscriptions.
Meta Stock: An Affordable Investment Option
After rising 532% from its 2022 low of approximately $90, Meta’s stock still offers value with a trailing 12-month earnings per share (EPS) of $21.23, leading to a price-to-earnings (P/E) ratio of just 27.2, considered relatively low in the tech sector.
This valuation represents a 15% discount compared to the Nasdaq 100, which stands at a P/E ratio of 32.2. Meta’s stock remains an economical choice among AI companies valued at $1 trillion or more, with Alphabet being the only exception currently facing regulatory challenges.
Looking ahead, Meta’s forward P/E ratio is estimated at 22.7, based on a consensus EPS forecast of $25.33 for 2025. To align with the Nasdaq 100’s P/E, Meta’s stock would need to increase by 42% over the next year.
Developing advanced LLMs like Llama is costly. Training Llama 3 required around 16,000 Nvidia H100 GPUs, but Llama 4 aims to exceed 100,000. Therefore, Meta plans to allocate up to $40 billion on AI infrastructure in 2024, with expenses projected to rise to $52 billion in 2025, according to Morgan Stanley. If Cathie Wood’s predictions are correct, Meta could eventually enjoy significant revenue from these investments, offering substantial returns for investors. Given its appealing valuation, Meta stock could be the standout choice among AI giants for next year.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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. 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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla and has recommended long options 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.
