The field of artificial intelligence (AI) isn’t just some fad Wall Street is currently obsessed with but will fade into utter insignificance soon. While some of the hype will die down eventually, the technology has the potential to make corporations more efficient and increase profits over the long run. So, investing in excellent AI companies remains a great idea. In that spirit, let’s consider one AI stock that looks like an excellent investment opportunity for 2025 and beyond: Meta Platforms (META 2.50%).
Meta Platforms’ AI angle
Some companies are offering various AI-related services to corporations or consumers. Others are taking on AI-based initiatives to improve their businesses. Many, like Meta Platforms, are doing both. The company’s Meta AI is a platform, available for free, that is looking to rival ChatGPT on a range of performance metrics. This AI assistant can perform tasks, from basic search queries to image generation, all for the price of a Facebook or Instagram account — something many people already have. Besides the generative capabilities of Meta AI, Meta Platforms has released various iterations of its open-source large language model, Llama.
These may be free for now, but don’t think Meta Platforms doesn’t plan on monetizing these efforts eventually. Elsewhere, the company has used AI to increase engagement on platforms like Facebook and Instagram through recommendation algorithms. It also helps companies looking to advertise on its websites and apps through AI-based tools that help them quickly create ads. How are all these initiatives working? Pretty well, according to the company.
Meta AI had over 500 million monthly active users as of the third quarter. Meta Platforms also reported that AI-powered video-feed recommendations have helped increase the time people spend on Facebook by 8% and on Instagram by 6% this year. Further, companies using Meta’s advertising tools have increased conversions by 7%. So, Meta Platforms’ AI business is helping improve its financial results. In the third quarter, the company’s revenue increased by 19% year over year to $40.6 billion.
The company’s Q3 earnings per share of $6.03 was up 37% compared to the year-ago period. Meta also ended the quarter with 3.29 billion daily active users (DAUs). Meta Platforms increasing its DAUs may not have anything to do with AI, but when they spend more time on Facebook and Instagram because of AI, that can directly impact the company’s revenue.
Looking beyond AI
AI could be an important long-term tailwind for Meta Platforms, especially as it seeks to find more ways to monetize some of its current initiatives in the field. It’s not a race. Meta Platforms acquired WhatsApp in 2014. Its monetization efforts on this platform have been slow. Meta is ramping up things like paid messaging on WhatsApp, but it represents a tiny percentage of its overall revenue. The point, though, is that Meta Platforms has a massive ecosystem.
For now, it continues to make strong revenue and earnings from its advertising business. But that could change in the long run. Whether through AI, WhatsApp, e-commerce, or its metaverse ambitions, Meta Platforms will find many other monetization opportunities.
Here are two other reasons to invest in the stock.
First, Meta Platforms has a strong competitive advantage, particularly from the network effect. For people or businesses who are on Instagram or Facebook, these platforms only get more useful for almost any purpose as more users join. That’s why Meta Platforms’ ecosystem is second to none in the social media landscape, and it ensures that the company will remain a leader for the foreseeable future.
Second, Meta Platforms is now a dividend-paying company. We can’t call it a great dividend stock yet, but maybe it will be that in a decade. In the meantime, opting to reinvest the company’s payouts will help boost what should already be strong returns in the next decade.
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. Prosper Junior Bakiny has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
