We recently published a list of 10 AI Stocks on Wall Street’s Radar After DeepSeek Breakthrough. In this article, we are going to take a look at where Meta Platforms Inc (NASDAQ:META) stands against other AI stocks on Wall Street’s radar after DeepSeek breakthrough.
AI investors are desperately trying to find clues on the real impact of DeepSeek on chip demand in the future and gauge how the breakthrough in China would impact US companies. Tae Kim, senior technology writer at Barron’s, said in a latest program on CNBC that DeepSeek has been able to significantly reduce the AI costs but that would increase more use cases of the technology:
“Over time, computing history has shown when you get more computing power and put that into the hands of developers, they figure out new applications, new workloads to use it. I mean, there’s that saying, “Oh, you only need 640k of memory,” and then obviously that proved false. So over time, like researchers, I mean, we have healthcare, drug discovery, trillions of proteins that need to be simulated, robotics. There are these three mega trends that are happening this year right now: multimodal, where you analyze audio and video, there’s AI agents, all these things are happening that are going to require more computing power.”
The question, however, everyone would be focusing on in the coming days is what if a hardware breakthrough happens in China and the country comes up with its own AI chips performing at par with its US counterparts.
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Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 235
Meta Platforms Inc (NASDAQ:META) is considering testing the Chinese AI model DeepSeek in its generative AI tools for advertisers, The Information recently reported, citing a company source.
The employee told The Information that Clara Shih, Meta Platforms Inc (NASDAQ:META) VP of Business AI, said the company is considering DeepSeek due to its “high performance.”
Meta crushed expectations with the latest quarterly results but yet again pointed to higher expenses in the future. In 2025, it sees total operating expenses in a range of $114-$119 billion, 19-25% y/y growth. Capex is expected to rise 61-74% y/y to $60-$65 billion, compared to just $37.3 billion in FY24. Advertising rose strongly but analysts believe it should be seen in the context of higher political ad spend and holiday quarter perspective. In 2025, the company might not be able to keep reporting double-digit growth in ad pricing amid weaker consumer spending and a cautious macroeconomic backdrop.
In the long term, Meta shares are expected to grow because of AI. How?
Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. Meta Platforms (NASDAQ:META)’s advancements in Reels and WhatsApp are helping manage CapEx growth as the company strives to stay competitive in AI. Meta Platforms (NASDAQ:META)’s substantial user base of 3.3 billion provides a data and distribution edge that could capture a significant share of the GenAI market.
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q4 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META): Investment Initiated: April 2018: Internal Rate of Return (IRR*): 22% *IRR represents the annualized rate of return on an investment, accounting for the timing and magnitude of cash flows over the holding period.
For META, our 22% IRR aligns closely with the company’s compounded growth in earnings per share (EPS) and free cash flow per share during the 6 years holding period.
Looking ahead, Meta is expected to grow its revenues, earnings, and free cash flow per share at mid-teens rates over the next two years. There’s a good possibility that it could exceed these estimates, considering the breadth of growth initiatives currently in place, such as advancements in Al, monetization of Reels, expansion into business messaging, and the ongoing development of the metaverse…” (Click here to read the full text)
Overall, META ranks 2nd on our list of AI stocks on Wall Street’s radar after DeepSeek breakthrough. While we acknowledge the potential of META, our conviction lies in the belief that under the radar 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. This article is originally published at Insider Monkey.
