AI Stocks Experience Volatility
After a three-year increase, artificial intelligence (AI) stocks are undergoing notable volatility, particularly affecting major tech players like the “Magnificent Seven” that previously boosted the S&P 500. In early 2023, these stocks contributed to a decline in the index amidst investor concerns over AI revenue growth and geopolitical tensions, including the war in Iran. Although there has been a rebound this month, uncertainty remains regarding the sustainability of this trend.
Meta Platforms Positioned as a Bargain
Among the Magnificent Seven, Meta Platforms (NASDAQ: META) stands out as the cheapest, trading at 21 times forward earnings estimates. With a user base of 3.5 billion across its platforms—Facebook, Messenger, Instagram, and WhatsApp—Meta generates substantial revenue from advertising. The company is also heavily investing in AI, recently unveiling its large language model Muse Spark and planning to monetize it through third-party developer access.
Long-Term Outlook for Meta’s Stock
Historically, Meta has witnessed a correlation between its return on invested capital (ROIC) and stock performance. CEO Mark Zuckerberg indicated in a recent earnings call that the current phase of heavy AI investment might lead to revenue growth over several years rather than immediately. As such, analysts suggest that this could be an opportune moment for investors to consider acquiring Meta’s stock, given its potential for long-term growth against the backdrop of the broader market challenges.
