Top 10 Trending AI Stocks to Watch in November

3. Meta platforms (NASDAQ:META)

Number of Hedge Fund Investors: 219

Despite posting strong quarterly results, 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’s advancements in Reels and WhatsApp are helping manage CapEx growth as the company strives to stay competitive in AI.

Meta’s clear monetization strategy for its generative AI, especially with Llama3, makes it a strong contender against rivals like OpenAI’s ChatGPT. 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’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.

Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 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)