Year to date, Meta Platforms is the best-performing stock within the Magnificent Seven.
The company’s plan to automate ad creation on its platforms by 2026 could provide a lucrative new revenue stream for the digital ad giant.
10 stocks we like better than Meta Platforms ›
Quick, what’s the best-performing Magnificent Seven stock so far this year?
If you answered Meta Platforms (NASDAQ: META), you’d be right — at least as of this writing. As of right now, Meta has generated a year-to-date return of 16.7%, beating out all other Magnificent Seven stocks. Only one other stock — Microsoft — boasts a double-digit gain so far this year. Nvidia, the hottest stock of the last five years, has only generated a return of 6% as of this writing.
So, is Meta now the best AI stock around? Let’s take a closer look.
Image source: Getty Images.
First, let’s get one thing clear: Meta spent big on AI. We’re talking tens of billions of dollars, with tens of billions more to come over the next few years. The company spent lavishly on the metaverse, but also on AI infrastructure and data centers.
Of course, simply spending money doesn’t guarantee a return. However, Meta’s AI spending now appears far more focused than it did in years past. Specifically, the company has a plan to fully automate ad creation and placement across its suite of platforms such as Facebook and Instagram by 2026.
This could represent a revolution in how ads are created and how ad campaigns are run. In theory, Meta could cut out ad agency middlemen that charge lavish fees before an ad ever reaches a customer. Furthermore, Meta could use its enormous trove of user data to personalize ads, potentially increasing the return on investment for ad buyers.
In addition to its AI-powered ads strategy, Meta has other bullish catalysts on its side. Take its Threads product, which competes with X (formerly known as Twitter). Meta’s Threads is now attracting 320 million to 350 million monthly active users (MAUs). That’s up from about 150 million a year ago.
Image source: Statista
Combine Meta’s AI initiatives with the growth of Threads and the company’s excellent first-quarter results, and Wall Street is turning even more bullish on shares of Meta.
Analysts from major firms, including Bank of America and RBC raised their price targets for Meta’s stock recently. These analysts pointed to better-than-expected first-quarter earnings along with Meta’s AI initiatives as reasons for raising their price targets.
To begin with, it’s important to note that Meta Platforms might not be a stock for every investor or portfolio. While Meta is an excellent company and has a bright future ahead of it, its stock still boasts a rich valuation that might put it out of reach for value investors.
For example, its price-to-sales (P/S) ratio is 10x. That’s not unheard of within the tech sector, but it remains far above the average P/S ratio of around 2x-3x. Moreover, Meta’s P/S ratio of 10x is even higher than some of its peers. Alphabet, for example, sports a much lower P/S ratio of only 6x.
All that said, Meta remains a solid choice for investors looking for an AI stock. After all, just like anything else, you pay up for quality, and Meta is a quality business that continues to execute at a high level. Moreover, if the company can deliver on its AI initiatives — including AI-powered ads — I believe its stock could soar in the coming years. For me, that makes Meta an AI stock to consider right now.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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. Bank of America is an advertising partner of Motley Fool Money. Jake Lerch has positions in Alphabet and Nvidia and has the following options: long July 2025 $425 puts on Microsoft. The Motley Fool has positions in and recommends Alphabet, Bank of America, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Should You Forget Nvidia and Buy This Artificial Intelligence (AI) Stock Right Now? was originally published by The Motley Fool
