Billionaire Phillipe Laffont’s Top 10 “Mostly AI” Stock Picks

1. Meta Platforms, Inc. (NASDAQ:META)

According to Wall Street analysts, earnings of Meta Platforms, Inc (NASDAQ:META) are expected to grow 14.50% next year and by 30% over the next five years on a per-annum basis. Long term analysts believe that large amount of Capex posted by Meta in the range of $35 billion to $40 billion could be for investment in AI that Meta uses to generate ads. Furthermore, Meta generated a revenue of $36.5 billion up by 27% with ads forming 97% of it. Meta Platforms, Inc’s (NASDAQ:META) ads revenue is expected to rise by 17% in 2024.

Coatue Management holds 4 million shares worth $2 billion in Meta Platforms, Inc. (NASDAQ:META) forming 8% of the fund’s portfolio, whereas GQG Partners is the largest shareholder that holds 11 million shares worth over $5 billion.

RiverPark Large Growth Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its first quarter 2024 investor letter:

“Meta Platforms, Inc. (NASDAQ:META): Meta was a top contributor in the quarter following fourth quarter earnings results in which the company reported accelerating revenue growth and expanding margins driven by a rebound in online advertising and strong user growth. On February 2nd, Meta reported 4Q23 revenue of $40.1 billion (+25% y/y up from +23% in 3Q23) and EPS of $5.33 (+203% y/y), and the midpoint of 1Q24 revenue guidance was $35.8 billion (+25% y/y), all well ahead of investors’ expectations. The company reported impressive revenue acceleration in its core advertising businesses, including new products like Reels and Threads. Advertiser adoption of Meta’s AI targeting tools helped drive strong ROI and higher spend across multiple categories.

META owns multiple social media platforms, each with more than one billion users, has an 81% gross margin, and generated $44 billion of FCF in 2023. Both its Facebook and its Instagram franchises have more than 2 billion Daily Active Users and generate the bulk of the company’s revenue. Recently, the company’s short form video offering, Reels, and public text-sharing app, Threads, achieved mass user engagement and growing advertiser adoption which have helped return the company to strong revenue and free cash flow growth. Even after the recent stock price advance, META shares trade at 20x Wall Street’s consensus estimates for 2025 EPS, estimates that we think could prove to be too low.”

While we acknowledge the potential of META as an AI play, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None.