Tech Giants Face Turbulent Times, but Meta Rides the AI Wave to Success

The start of 2025 is proving tough for many leading technology companies. Despite significant investments in artificial intelligence (AI) and cloud technology, industry heavyweights—Amazon AMZN, Alphabet (GOOG, GOOGL), Microsoft MSFT, Apple AAPL, and Tesla TSLA—have had difficulty impressing Wall Street.

Challenges Faced by Major Tech Players

Cloud Revenue Declines: There has been a slowdown in the cloud services sector, which is crucial for the growth of companies like Amazon, Google, and Microsoft. In Q4, AWS revenues (15.3% of total sales) grew by 18.9% year over year, but this fell short of expectations by 0.16%. Microsoft Cloud revenues grew by 22%, meeting projections. In contrast, Google Cloud revenues rose impressively by 28.8%, beating the Zacks Consensus Estimate by 4.02%.

Apple’s iPhone Sales Drop: Apple is encountering challenges with its iPhone sales, which are pivotal for overall revenue. In Q4, iPhone sales rose by only 5.5% year over year, making up 48.7% of total sales and slightly exceeding the Zacks Consensus Estimate by 0.59%.

Tesla’s Disappointing Results: Tesla’s financial performance disappointed, missing expectations for both revenue and profits due to weaker sales and production hiccups.

Decline in Stock Performance Across the Board

These setbacks have taken a toll on stock prices. As of February 12, 2025, Alphabet’s stock is down 3.1%, while Microsoft and Tesla have fallen by 2.3% and a troubling 11.3%, respectively. Apple’s shares have decreased by over 2.8%. Although Amazon’s stock increased by 4% this year, it has seen a 1.4% drop since its earnings report on February 7.

Meta Shines Amid Industry Woes

In contrast to its rivals, Meta META is standing out in 2025. As of February 12, 2025, the social media powerhouse has enjoyed a remarkable stock increase of 21%, highlighted by a historic 19-day winning streak on Wall Street.

What sets Meta apart from its competitors? The company’s AI investments are directed at enhancing its own business rather than merely attracting external clients, according to Daniel Howley, Technology Editor for Yahoo Finance.

Meta’s Unique AI Strategy: Focused on Self-Improvement

While major tech firms are investing billions into AI to build cloud services for enterprise clients, Meta’s strategy outlines a different path. In 2025, Amazon is expected to spend over $100 billion on capital projects, while Google and Microsoft will invest around $75 billion and $80 billion, respectively.

Meta plans to commit $60-$65 billion to AI infrastructure. Following the success of DeepSeek’s low-cost AI, the sentiment on Wall Street favors Meta’s approach, which emphasizes sensible spending and higher returns.

Unlike Amazon, Google, and Microsoft, who are positioning themselves as AI service vendors, Meta is utilizing AI to refine its products and improve user experience, yielding more direct benefits to its bottom line.

Meta’s AI Innovations Fuel Growth

According to Yahoo Finance, Meta’s AI initiatives have led to higher user engagement, resulting in increased ad impressions and revenue. Currently, 4 million advertisers are using Meta’s generative AI tools, up from just 1 million six months ago. These tools assist businesses in developing targeted, effective advertisements, enhancing Meta’s advertising platform.

The Potential of Meta’s Open-Source AI

Another aspect that makes Meta attractive to investors is its open-source AI strategy. The company’s Llama AI models are available to developers with certain usage restrictions, including a cap of 700 million monthly users per service. While Meta currently doesn’t charge for these models, analysts predict they could turn into a significant revenue source through licensing in the future.

CEO Mark Zuckerberg has emphasized that the upcoming Llama 4 will offer significant advancements, including the capability to process text, images, and audio simultaneously, alongside an upgraded ability to interact intelligently with users.

Though the AI race is still young, Meta is leading the pack at present. The company’s methods are yielding quicker rewards than its competitors, who are focused on navigating the challenges of user-selling AI services. For now, investors are encouraged to consider Meta and related ETFs, including Fidelity MSCI Communication Services Index ETF FCOM, iShares Global Comm Services ETF IXP, and Vanguard Communication Services ETF VOX.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will keep you updated on vital news and analysis, plus top-performing ETFs, each week.

Get it free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Alphabet Inc. (GOOG): Free Stock Analysis Report

Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

Tesla, Inc. (TSLA): Free Stock Analysis Report

Alphabet Inc. (GOOGL): Free Stock Analysis Report

Vanguard Communication Services ETF (VOX): ETF Research Reports

Fidelity MSCI Communication Services Index ETF (FCOM): ETF Research Reports

iShares Global Comm Services ETF (IXP): ETF Research Reports

Meta Platforms, Inc. (META): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.