Meta’s Strategic AI Investments
AI has always been deeply embedded in Meta’s core services, from curating Facebook and Instagram feeds to optimizing marketing campaigns for advertisers. Over the past two years, Meta has significantly increased AI investments across its product ecosystem. A major component of this focus is Reels, Meta’s short-form video platform and competitor to TikTok, which heavily relies on AI to recommend engaging content to users. Through sophisticated, adaptable algorithms, Meta has built a more general recommendation engine, enhancing user engagement and driving a 10% increase in ad impressions in Q2, along with a 10% increase in average price per ad.
Beyond content recommendations, Meta is developing AI-powered tools for advertisers, such as Advantage+, which provides features that help marketers target campaigns with optimized criteria. CEO Mark Zuckerberg envisions AI eventually handling ad creative development, testing, and campaign optimization, allowing marketers to set budgets and objectives while AI does the rest.
Another significant milestone is the rollout of Meta AI within Meta’s messaging platforms, an AI assistant comparable to OpenAI’s ChatGPT. With 185 million weekly users as of August, Meta AI is quickly becoming a major player in the space, aligning with Zuckerberg’s goal to make it the most widely-used AI assistant by 2024.
Meta’s Long-Term Focus Pays Off
Meta’s aggressive spending on AI research and development provides it with a major competitive advantage in the AI landscape. Few companies have Meta’s resources to commit to such extensive investments. According to Zuckerberg, Meta’s strong performance across core products enables deep, long-term investment in future growth areas. The company’s capital expenditure reached $28 billion in 2023, with an expected increase to $37-$40 billion this year, demonstrating Meta’s commitment to advancing its AI initiatives.
A key advantage in Meta’s strategy is the open-sourcing of its LLaMA foundation model, fostering a more robust developer ecosystem. Though this move bypasses direct licensing revenue, it positions Meta’s AI model as a go-to option for developers, accelerating innovation in AI applications. In the long run, this approach can lead to more efficient software, scalable hardware, and a wider array of tools—ultimately benefiting Meta by reducing costs and expediting product development.
Will Meta Announce a Stock Split in 2025?
Meta’s share price, nearing $600, may justify a stock split. A split would make Meta shares more accessible to retail investors, further enhancing liquidity and reinforcing Meta’s growth signal. Currently, shares trade at less than 24 times 2025 earnings estimates—a relative bargain compared to other AI-focused companies. This valuation, along with Meta’s commitment to stock buybacks, underscores management’s belief in the company’s long-term potential. In the previous quarter, Meta repurchased $6.3 billion in stock, with over $60 billion remaining under its current authorization, highlighting management’s commitment to returning value to shareholders.
Additionally, capital expenditure growth will impact earnings in the years ahead as depreciation expenses hit income statements. However, Meta’s strong free cash flow growth positions it favorably for sustainable expansion. With or without an imminent stock split announcement, Meta’s long-term AI ambitions make it an attractive opportunity at current price levels.
