It is no secret that synthetic intelligence (AI) has been the primary theme fueling the motion on Wall Road over the previous couple of years. Particularly, the degrees of demand for high-performance GPUs, networking tools, and information facilities have dominated the majority of the AI narrative to this point.
However what about monetization? Assessing which firms — apart from Nvidia (NASDAQ: NVDA) — are really producing measurable AI-driven development may be difficult.
For my part, AI-focused buyers ought to hold Meta Platforms(NASDAQ: META) on their radar in 2026. Whereas its megacap friends are receiving the lion’s share of the eye, the social media chief may very well be on the cusp of changing into AI’s subsequent massive contributor.
Picture supply: Getty Photos.
Meta owns and operates 4 large social media platforms — Fb, Messenger, Instagram, and WhatsApp. Throughout its “household of apps,” the corporate serves 3.5 billion day by day energetic customers, on common. So it is not shocking that advertisers are desirous to get in entrance of Meta’s large viewers.
In the course of the third quarter, Meta generated $51.2 billion in income, $50 billion of which got here from its promoting phase. This represented 26% development 12 months over 12 months. Whereas that is spectacular, it was not sufficient to get Wall Road excited.
The place issues get fascinating is how Meta is sustaining its development profile. Inside its AI division, Meta launched a product referred to as Benefit+, a collection of machine studying instruments that helps advertisers enhance their focused campaigns.
On the corporate’s third-quarter earnings name, CFO Susan Li informed buyers that Benefit+ is now working at a $60 billion annual income run charge. That was practically a threefold enhance from the primary quarter.
Beth Kindig, lead tech analyst on the I/O Fund, drew an fascinating parallel between Meta’s development and that of OpenAI. ChatGPT was launched to the general public in November 2022, simply over three years in the past. Based on quite a few media shops, OpenAI is anticipated to attain a $20 billion income run charge in 2025. Throughout this identical interval, Meta grew its AI adverts enterprise from primarily nothing to $60 billion — 3 instances greater than OpenAI.
Taking this one step additional, Kindig wrote that “it will require a step-up from 175% development YoY to 460% year-over-year for Microsoft to match Meta’s AI income.”
In opposition to this backdrop, Kindig posits that Meta has quietly grow to be the second-largest AI monetizer subsequent to Nvidia.
Whereas Kindig’s evaluation is fascinating, buyers should not get too hung up on the hierarchy of AI-related gross sales. The extra vital takeaway from her evaluation is that Meta’s top-line development seems muted in comparison with the accelerating gross sales development of its rising AI merchandise.
As I alluded to earlier, many of the chatter surrounding AI over the previous couple of years has been about spending. Maybe no different firm is below extra scrutiny on this regard than Meta.
Its capital expenditures are far outpacing the speed at which its income is growing. In the long term, that is unsustainable.
It is no surprise buyers grew to become spooked after Meta’s administration mentioned that its capex could be “notably bigger” in 2026. The mixture of aggressive spending and a brand new income stream that has not but matured will virtually actually hinder Meta’s skill to generate extra money move in 2026.
Whereas I agree with Kindig within the sense that almost all buyers are most likely overlooking the magnitude and potential of Meta’s new AI adverts enterprise, prudent buyers aren’t going to leap into the inventory based mostly on one metric.
During the last 12 months, Meta’s inventory has traversed plenty of peaks and valleys. The pronounced sell-offs had been largely influenced by buyers’ wariness concerning the firm’s spending.
Given its achievements thus far and the trajectory of Benefit+, I am personally cautiously optimistic about its prospects. Nonetheless, it nonetheless has loads to show towards Amazon, Alphabet, and others.
For these causes, good buyers must be looking out for particular updates concerning Benefit+ and Meta’s different AI ambitions. If these merchandise proceed to blossom and place the corporate to develop quicker than its present spending trajectory in the long term, I might reap the benefits of any promoting strain and purchase the dip within the new 12 months.
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Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Idiot has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
