Investing in Artificial Intelligence (AI) Shares to Keep for 2025 and Beyond's Horizon
Investing in Artificial Intelligence (AI) Shares to Keep for 2025 and Beyond's Horizon
Artificial Intelligence (AI) isn't just a fleeting trend Wall Street is currently infatuated with, destined for oblivion soon. While some of the hype will inevitably dissipate, the technology holds significant potential to amplify corporate efficiency and boost profits in the long haul. Consequently, investing in top-notch AI companies remains a shrewd strategy. Take, for instance, one AI stock that appears to be a lucrative investment opportunity for 2025 and beyond: Meta Platforms (META, 2.50%).
Meta Platforms' AI perspective
There are numerous corporations and individuals leveraging various AI services, while others are integrating AI to enhance their businesses.Meta Platforms, however, is a multifaceted player accomplishing both. Its Meta AI, a free-to-use platform, aspires to rival ChatGPT across multiple performance parameters. This AI assistant can manage tasks ranging from simple search queries to image generation, all for the price of a Facebook or Instagram account - something numerous people already have. Besides Meta AI's generative capabilities, the company has also introduced several iterations of its open-source large language model, Llama.
Although they are gratis for now, Meta Platforms has not ruled out monetizing these initiatives in the future. Elsewhere, the company has utilized AI to boost user engagement on platforms such as Facebook and Instagram through recommendation algorithms. Additionally, AI-powered tools assist advertisers in rapidly creating ads for its platforms. According to the company, these initiatives are performing well.
Meta AI boasts over 500 million monthly active users as of the third quarter. Meta Platforms also reported that AI-driven video-feed recommendations have increased viewer duration on Facebook by 8% and Instagram by 6% this year. Furthermore, advertisers utilizing Meta's advertising tools have observed a 7% surge in conversions. Consequently, Meta Platforms' AI business is contributing to its financial success. In the third quarter, the company recorded a 19% year-over-year revenue growth of $40.6 billion.
The company's Q3 earnings per share of $6.03 rose 37% compared to the previous year. Meta also reported 3.29 billion daily active users (DAUs) at the end of the quarter. Despite Meta Platforms not directly correlating its increased DAUs with AI, an extended user presence on Facebook and Instagram due to AI can have a direct impact on the company's revenue.
Beyond AI
AI may serve as a long-term boost for Meta Platforms, facilitating the discovery of additional revenue streams in the field. It's not a sprint; Meta Platforms acquired WhatsApp in 2014. Monetization attempts on this platform have been gradual. Nevertheless, Meta is intensifying its focus on paid messaging on WhatsApp, albeit it accounts for a negligible percentage of total revenue. The takeaway, though, is that Meta Platforms boasts a substantial user base.
In the interim, the company maintains robust revenue and earnings from its advertising business. However, this might change in the long run. Whether through AI, WhatsApp, e-commerce, or its metaverse aspirations, Meta Platforms will undoubtedly unearth numerous monetization avenues.
Here are two additional reasons to invest in the stock.
First, Meta Platforms boasts a strong competitive advantage owing to the network effect. For existing Instagram or Facebook users, these platforms become increasingly valuable for nearly any purpose as more users join. This is why Meta Platforms boasts an unrivaled ecosystem in the social media landscape, ensuring its dominance for the foreseeable future.
Second, Meta Platforms has now become a dividend-paying company. While it's premature to label it as a great dividend stock, it could potentially acquire that title in a decade. In the meantime, opting to reinvest the company's payouts will help magnify anticipated strong returns in the next decade.
In the context of Meta Platforms' financial performance, their AI-driven initiatives have significantly contributed to their revenue growth, with a 19% year-over-year increase in Q3 2022, totaling $40.6 billion. This growth, coupled with an 8% increase in viewer duration on Facebook and a 6% increase on Instagram, highlights the potential of investing in AI technology within the finance sector, such as Meta Platforms.
Furthermore, Meta Platforms' robust network effect provides a strong competitive advantage, making existing Instagram or Facebook users more valuable as more users join, maintaining their dominance in the social media landscape and ensuring a lucrative future for investors in AI-focused finance companies like Meta Platforms.