We recently published a list of 10 Trending AI Stocks to Watch in December. In this article, we are going to take a look at where Meta Platforms (NASDAQ:META) stands against other trending AI stocks to watch in December.
Jared Cohen, Goldman Sachs president of global affairs, co-head of the Goldman Sachs Global Institute, said while talking to CNBC in a latest program that amid rising data center-driven energy demand because of AI, the US would need to collaborate with other countries via “diplomacy.”
“If you look at data centers for cloud workloads versus data centers for AI workloads, data centers for AI workloads require ultra-high density. They need a concentrated power source, and so intermittent power like wind and solar doesn’t fit the bill. You need base load power, so I think nuclear, coal, and natural gas are necessary, and we have plenty of that in the US. The problem is we can’t transport it from where it is through multiple jurisdictions because of the ‘not in my backyard’ issue. So, the US is going to need some kind of overflow option if it wants to continue leading in this space. There’s not a single geography that I would say represents a panacea to this problem.”
Answering a question about whether the return to relatively cheaper and reliable energy sources like coal could satisfy the AI-driven energy demand, the analyst said the US would still need to look beyond just relying on its own sources because the need for power is huge.
“We’re going to have to probably bring another 35-plus gigawatts of power online relative to the 17 gigawatts of power that are already online feeding these data centers in just the next couple of years. That’s not enough, that’s not enough time. So, you know, the US is going to continue to lead in the space, but it’s not going to be able to lead on its own.”
READ ALSO Jim Cramer’s Latest Lightning Round: 11 Stocks to Watch and Jim Cramer on AMD and Other Stocks
For this article we picked 10 AI stocks that are getting investors’ attention on the back of latest news. With each stock we have mentioned the number of hedge fund investors. 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).
Bloomua / Shutterstock.com
Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 235
Brian Nowak, head of U.S. internet research at Morgan Stanley, while talking to CNBC in a latest program explained how Meta Platforms Inc (NASDAQ:META) is using AI for monetization of its huge user base and said the company is “farthest along” in AI monetization.
“Meta continues to be the company showing the most early signals on how to monetize generative AI and GPU-enabled machine learning. They are building better models to analyze all of their data more effectively. As they analyze more data, time spent per user is growing off already large numbers. You already have 30 to 40 minutes per user per day across Facebook, Instagram, and other platforms, and that time is growing. On top of that, the way they monetize this time through more relevant ads—ads with higher click-through rates that actually drive more transactions—is also improving. So, when we think about this early generative AI cycle, Meta continues to be the company farthest along in building new models to better analyze its leading first-party data, drive more engagement, and monetize that engagement more effectively.”
Despite posting strong quarterly results, Meta Platforms (NASDAQ:META) shares fell as rising AI-related expenses yet again spooked investors about ROI. However, Meta platforms (NASDAQ:META) bulls believe Zuckerberg’s plan to keep spending on AI is totally justified.
Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. Meta also reported strong adoption of its Llama AI model, attracting over 500 million monthly active users across its platforms. This progress positions Meta well for robust profitability in the next two years as it scales its AI infrastructure.
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 clear monetization strategy for its generative AI, especially with Llama3, makes it a strong contender against rivals like OpenAI’s ChatGPT. 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. Although short-term investors may be concerned about Meta Platforms (NASDAQ:META)’s increased AI spending, its forward P/E ratio of 24x, based on FY 2025 EPS estimates of $24.62, makes it the second-most affordable big tech stock, after Google, within its peer group (Apple, Amazon, Microsoft, and Google).
According to some estimates, Meta Platforms (NASDAQ:META) is on track to potentially achieve $25-26 per share in EPS next year, slightly above the consensus estimate. Factors such as a strong U.S. economy, lower inflation, favorable online ad pricing, and AI investments could fuel earnings growth. If Meta’s valuation aligns with the industry average P/E of 26.6x, shares could reach over $600.
Alger Spectra Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q3 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) operates the world’s largest social network, with over 3 billion monthly active users. The company generates more than 95% of its revenue from advertising, evenly split between North America and international markets. During the quarter, shares contributed to performance following the release of strong fiscal second quarter operating results, with revenues and earnings beating analyst estimates. Management also raised their fiscal 2024 revenue guidance, citing improved advertising monetization. CEO Mark Zuckerberg stated that AI has played a key role in these successes, as the company is leveraging AI to enhance targeting, measurement, ranking, and ad delivery. Higher user engagement, driven by video ranking, content recommendations, and single video views, has also supported growth. Additionally, the optimization of ad placements within videos and automation of ad campaigns are further boosting monetization.”
Overall, MU ranks 2nd on our list of trending AI stocks to watch in December. While we acknowledge the potential of Amazon.com (NASDAQ:AMZN), 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.