Quick, can you name the top-performing stock within the Magnificent Seven for this year?
If you guessed Meta Platforms (META 2.77%), you would be correct — at least as of this moment. Currently, Meta has achieved an impressive year-to-date return of 16.7%, outpacing all other stocks in the Magnificent Seven category. Only one other stock — Microsoft— has managed to secure a double-digit gain this year. In contrast, Nvidia, which has been the standout performer over the last five years, has only achieved a return of 6% as of this update.
So, does this make Meta the leading AI stock in the market today? Let’s delve deeper into the details.
Image source: Getty Images.
Unlocking the Potential of Meta’s AI Investments for Future Growth
Let’s establish one important fact: Meta has invested heavily in artificial intelligence. We are discussing expenditures in the range of tens of billions of dollars, with even more financial commitments anticipated over the upcoming years. The company has not only directed funds towards the metaverse but has also made significant investments in AI infrastructure and data centers.
However, it’s crucial to understand that merely spending money does not ensure a profitable return. That said, Meta’s approach towards its AI investments appears to be more strategic and focused compared to previous years. In particular, the company is working on a comprehensive plan to fully automate the advertisement creation and placement processes across its various platforms such as Facebook and Instagram by the year 2026.
This innovation could signify a transformative change in the way advertisements are crafted and in how ad campaigns are executed. In theory, Meta could eliminate the need for advertising agencies that typically impose hefty fees before an advertisement reaches its targeted audience. Furthermore, by leveraging its vast reservoir of user data, Meta could personalize ads more effectively, potentially enhancing the return on investment for advertisers.
Wall Street’s Positive Outlook Driven by Meta’s Momentum and Innovations
Alongside its innovative AI advertising strategy, Meta has several other positive catalysts propelling its growth. For instance, consider its Threads product, which is in direct competition with X (previously known as Twitter). Currently, Meta’s Threads is attracting between 320 million and 350 million monthly active users (MAUs), showing remarkable growth from approximately 150 million a year ago.
Image source: Statista
When you combine Meta’s impressive AI initiatives with the rapid user growth of Threads and the company’s strong performance in the first quarter, it’s no wonder that Wall Street is becoming increasingly optimistic regarding Meta’s stock.
Analysts from leading financial institutions, including Bank of America and RBC, have recently raised their price targets for Meta’s shares. These analysts have cited the better-than-expected earnings from the first quarter and Meta’s ongoing AI initiatives as key reasons for their upgraded price forecasts.
Evaluating Whether Meta Platforms is a Smart AI Stock Investment Today
Firstly, it’s essential to recognize that Meta Platforms might not be the ideal stock for every investor or portfolio. While Meta is widely regarded as an outstanding company with a promising trajectory, its stock is currently trading at a high valuation that may deter value-focused investors.
For instance, its price-to-sales (P/S) ratio stands at 10x. While this valuation is not unusual within the technology sector, it significantly exceeds the average P/S ratio, which hovers around 2x to 3x. Additionally, Meta’s P/S ratio of 10x is notably higher than several of its competitors. For example, Alphabet has a considerably lower P/S ratio, currently at only 6x.
That being said, Meta remains an attractive option for those seeking an AI stock investment. Just like any valuable asset, one must often pay a premium for quality, and Meta exemplifies a high-caliber business that continues to excel in its operations. Furthermore, if the company can successfully implement its ambitious AI initiatives — including AI-driven advertising — I believe its stock could see significant appreciation in the years to come. For these reasons, I consider Meta an AI stock worth contemplating at this moment.
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.
