Billionaire Mark Zuckerberg Transforms Meta into a Leader in Generative AI: Is It a Good Investment?
Meta Platforms, formerly known as Facebook, has invested a staggering amount into its projects, particularly in its Reality Labs division. This arm of the company is tasked with developing Meta’s take on the metaverse, as well as virtual reality (VR) products like the Quest headsets. While these ventures appear to be facing challenges, Meta has another avenue where its financial investment seems to be yielding results: artificial intelligence (AI).
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Meta’s Innovations in Artificial Intelligence
Meta has been actively researching AI for over a decade. The company’s early work focused on facial recognition, which then expanded into machine learning and virtual reality. Recently, Meta made significant strides with its Llama large language model, now in its third version. In July, when Llama 3.1 was launched, Meta claimed it was the “largest and most capable openly available foundation model” worldwide. Company CEO Mark Zuckerberg noted that Llama is rapidly becoming an industry standard.
Furthermore, Llama serves as the core engine behind Meta AI, the company’s chatbot available on its major social media platforms: Facebook, Instagram, WhatsApp, and Messenger. As of the latest reports, Meta AI has surpassed 500 million monthly active users, showcasing its substantial growth. The enhanced AI capabilities have also contributed to increased user engagement, with time spent on Facebook rising by 8% and by 6% on Instagram. Moreover, in October alone, over 1 million advertisers utilized Meta’s generative AI tools to create more than 15 million advertisements.
Zuckerberg projects that by year-end, Meta AI will become the most widely used AI chatbot, potentially outpacing rivals like OpenAI’s ChatGPT and Alphabet’s Gemini. Additionally, the collaboration with Ray-Ban to create smart glasses equipped with Meta AI enables users to ask questions about their surroundings, representing another innovative step for the company.
The Future of Wearable AI Devices
The market for wearable AI devices has been challenging, with previous products like Quest failing to achieve significant sales. Similarly, Apple recently reduced production for its Vision Pro. However, the new Ray-Ban Meta glasses may offer a solution, as they resemble regular sunglasses and carry the trusted Ray-Ban brand, which might facilitate broader acceptance among consumers.
Meta’s Financial Health and Market Position
Despite uncertainties in the generative AI space, two key observations arise regarding Meta. First, the growing user base of Meta AI provides a competitive edge in the chatbot market. Second, Meta’s advertising revenue benefitted from its AI advancements, with the third-quarter figures showing a 19% increase, bringing in $39.9 billion. This revenue contributes to nearly all of the company’s total revenue of $40.6 billion during that period.
Meta’s advertising segment is highly profitable, reporting a 43% operating margin with $17.3 billion in operating income, despite a $4.4 billion loss from Reality Labs. This demonstrates that Meta Platforms continues to evolve and generate substantial profits, even amid challenges. The stock is currently priced at a price-to-earnings ratio of 27, aligning closely with the S&P 500 index, while the company’s growth trajectory remains stronger.
With these factors in mind, the combination of rapid growth, reasonable valuation, and a leading position in AI makes Meta Platforms an intriguing investment opportunity in the tech landscape.
