Meta shares have reached a new all-time high following Mark Zuckerberg’s compelling presentation of AI benefits during a recent earnings call. This has boosted investor confidence and propelled the stock upward. Meta shares have risen 13% this month, significantly outperforming other tech giants, despite another jump in capital spending on AI and promises to increase it in the future. The stock rose 1.7% on Thursday to a record high of $544.23.
AI’s Impact on Meta’s Core Business
According to Bloomberg, the secret to this success is that Zuckerberg has been able to convince investors that artificial intelligence can help improve the company’s core business, digital advertising. Other Big Tech companies like Amazon, Microsoft, and Alphabet have failed to articulate the benefits of AI for their businesses as clearly.
“This was his best earnings call as a CEO,” said Gene Munster, managing partner at Deepwater Asset Management. “He explained the short-term and long-term benefits of AI, and the timing of all of this. It was compelling.”
Zuckerberg explained that Meta uses AI to improve advertisers’ ability to find target audiences, which directly impacts the company’s core revenue source. Meta also uses its proprietary large language models (LLMs) to improve content recommendations, which drives user engagement on Facebook and Instagram.
Meta’s AI Strategy vs. Competitors
At the same time, investors have become more critical of other big tech companies’ spending, notes NIX Solutions. Google parent Alphabet, for example, underperformed after an earnings report last month that showed higher-than-expected capital spending, despite topping earnings and revenue estimates. The same could be said for Microsoft, after its results showed slowing growth in its Azure cloud computing business.
Alphabet shares fell 9% after its earnings report on July 23, while Microsoft shares have remained little changed since its results on July 30. “Google basically said, ‘Well, we need to spend money to keep up with everyone else,’ which didn’t sound very compelling,” said Alec Young, chief investment strategist at Mapsignals. “Microsoft sold it a little better by saying it in a different way. But they’re essentially doing the same thing.”
Global X ETFs investment analyst Andrew Ye said Meta has and will continue to invest heavily in generative AI, but has apparently been more articulate about its vision for AI integration than its peers.
We’ll continue to monitor the situation and provide updates on how Meta’s AI strategy impacts its stock performance and market position.