We recently compiled a list of the 13 Best Big Tech Stocks To Buy Now. In this article, we are going to take a look at where Meta Platforms, Inc. (NASDAQ:META) stands against the other big tech stocks.
The State of Big Tech Right Now
Big tech has long been an immensely popular area to invest in when it comes to US stocks, and for good reason. Tech stocks, particularly those investing in AI and offering AI products, have been generating immense returns in 2024, with the second week of September bearing witness to their immense potential. This week, the S&P 500 and the Nasdaq Composite posted their best returns for the entire year, and many tech stocks were part of the faction that made this possible. As a result, there’s a huge rise in the popularity of AI and tech stocks. This is in stark contrast to market opinions on AI stocks, particularly during the first week of September, when many were very concerned that we are in an AI hypecycle that is bound to wind down soon.
Altimeter Capital’s CEO, Brad Gerstner, recently joined CNBC’s “Closing Bell” to discuss trends shaping big tech right now. He noted that the pace of AI at present is faster than any other tech development seen before. He also added that many investors are starting to lean back into big tech ahead of the election. This development may be coming about because of the historical trend that suggests that stocks perform better in the months directly following a US election – in which case, it makes sense for investors to be piling into big tech and AI right now since that’s a sure shot way to profit in the next few months.
How Is Big Tech Impacting Other Sectors?
A recent notable trend that people have begun to see because of the rise of big tech companies and the growing use of AI is a greater demand for power. Many major tech companies are beginning to require more energy, with the AWS-owner going as far as buying a nuclear-powered data center for $650 million recently.
The primary driving force for this rising demand is the need to develop AI. Many energy-conscious investors may see this new trend as a red flag for big tech. However, Jensen Huang has noted that while AI takes a ton of energy to train, once developed and trained, it will also help save energy. He particularly noted that AI is going to become so advanced through this development that it will eventually end up offering solutions that can change the way we use energy, making our operations endlessly more energy efficient.
With this in mind, big tech seems to be quite an interesting space to follow right now, especially in the days leading up to the US Presidential Elections. As such, we’ve compiled a list of the best big tech stocks to buy right now.
Our Methodology
For our list below, we selected big-tech stocks with the highest numbers of hedge funds holding stakes in them during the second quarter and then ranked them based on this metric in ascending order.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A team of developers working in unison to create the company’s messaging application.
Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META) is Mark Zuckerberg’s social media company that has gained immense fame over the past few decades. It is based in Menlo Park, California.
Since Meta Platforms, Inc. (NASDAQ:META) is a global leader in the internet economy, many investors are awed by the position it holds and the number of popular social media platforms it owns. Because of this, the company also has about 18% of the global market for digital advertising sales since its social media platforms enable it to generate huge amounts of ad revenue.
Another reason why Meta Platforms, Inc. (NASDAQ:META) is gaining investors is its focused approach to AI integration. This is one of the most aggressive companies when it comes to building a network infrastructure and computing power, and it has about $37-40 billion set aside to spend on AI just this year. Through AI spending, Meta Platforms, Inc. (NASDAQ:META) aims to enhance user experience on its platforms by adding greater functionality and boosting advertisers’ ability to target their audience.
With all this, some may be wary about Meta Platforms, Inc.’s (NASDAQ:META) intense spending habits. However, in the second quarter, the company announced a 38% operating margin and generated $10.9 billion in free cash flow. Meta Platforms, Inc. (NASDAQ:META) ended the quarter with a net cash position of $40 billion – so many investors’ concerns have been alleviated.
Meta Platforms, Inc. (NASDAQ:META) was spotted in the portfolios of 219 hedge funds in the second quarter, with a total stake value of $42.5 billion.
Rowan Street Capital mentioned Meta Platforms, Inc. (NASDAQ:META) in its second-quarter 2024 investor letter:
“We are pleased to report that Meta Platforms, Inc. (NASDAQ:META), our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return.
We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that’s simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There’s no escaping it; it’s the “price of admission” the market demands. If you take a look at the chart below, you’ll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop…” (Click here to read the full text)
Overall META ranks 3rd on our list of the best big tech stocks to buy. While we acknowledge the potential of META as an investment, we believe that AI stocks hold promise for delivering high 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.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
