Top 10 Stocks to Watch as AI Trade Dynamics Change

2. Meta Platforms Inc (NASDAQ:META)

Number of Hedge Fund Investors: 235

John Belton from Gabelli Funds said in a latest interview with Schwab Network that competition from TikTok has “come and gone” for Meta Platforms Inc (NASDAQ:META).

“TikTok is the more direct competition for Meta. I think there’s a little bit more overlap between their users and the type of time that TikTok is competing for. It’s really more overlap with Meta. A couple of years ago, Meta came under a lot of pressure when TikTok usage was really rising. I think what Meta and Google, for that matter, have been able to do over the last couple of years is start to play a little more of TikTok’s game, specifically on Google with YouTube. They’ve used AI to drive better content recommendations and improve user engagement, which is something TikTok was so successful at years ago. I think Meta and Google have really caught up to TikTok over the last two years on that front. Looking forward, I think the peak competition from TikTok has already come and gone.”

In 2025, Meta sees total operating expenses in a range of $114-$119 billion, with 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)