Key Points
As of October 2023, both Amazon (NASDAQ: AMZN) and Meta Platforms (NASDAQ: META) are down approximately 10% year-to-date, driven by investor concerns over their spending on artificial intelligence (AI). Despite this, Wells Fargo’s chief equity strategist Ohsung Kwon now believes their free cash flow may exceed analysts’ expectations, with potential for strong revenue growth in the future.
Amazon is investing heavily in AI data centers and partnerships with firms like Anthropic and OpenAI, anticipating ongoing demand for its services. The company’s current valuation stands at a forward P/E below 27. Meanwhile, Meta’s AI advancements are significantly enhancing its advertising business, leading to increased user engagement and more profitable ad space, with a forward P/E below 20.
