Meta Platforms: Beaten Down AI Player

Meta Platforms (NASDAQ:META) has long been a lightning rod for debate among investors. Once hailed as the vanguard of the metaverse, the company has faced skepticism over its ability to monetize its ambitious virtual world projects. However, a closer look at its recent strategic shifts reveals a compelling narrative: Meta is quietly building one of the most formidable AI infrastructures in the tech industry, with its metaverse ambitions now serving as a proving ground for AI-driven innovation. At a stock price of $650, Meta appears to be trading at a significant discount to its intrinsic value, particularly when viewed through the lens of its AI infrastructure investments and the transformative potential of AI in the metaverse.

A Strategic Pivot to AI Infrastructure

Meta's pivot from the metaverse to AI is not a retreat but a recalibration. The company has committed to spending up to $72 billion on AI infrastructure in 2025, with projections of similarly large outlays in 2026. This includes expanding data centers, servers, and compute resources, all critical for training and deploying advanced AI models. To fund these efforts, Meta has partnered with Blue Owl Capital on a $27 billion data center project in Louisiana, retaining a 20% stake in the venture. Additionally, the company is securing long-term energy solutions, including a partnership with Oklo to develop a nuclear power campus capable of providing 1.2 gigawatts of energy. These moves underscore Meta's recognition that AI's future hinges on reliable, scalable infrastructure-a bottleneck many competitors are struggling to address.

The company's AI investments are already yielding tangible results. In Q3 2024, AI-powered ad targeting and content moderation contributed to a 19% year-over-year revenue increase. Meta's proprietary "Meta Compute" initiative, designed to scale AI infrastructure, is a key differentiator, enabling the company to reduce reliance on third-party cloud providers and lower costs over time.

Undervaluation Amid AI Hype

Despite these strides, Meta's stock has underperformed, trading at a 22.7% discount to its intrinsic value according to a discounted cash flow (DCF) analysis. This undervaluation stems partly from lingering skepticism about the metaverse. Meta's Reality Labs division, once the centerpiece of its metaverse strategy, has faced criticism for its $60 billion loss since 2020. The company recently cut 10% of its Reality Labs workforce, signaling a shift in priorities. However, this restructuring should not be conflated with a retreat from innovation. Instead, it reflects a strategic reallocation of resources toward AI, where the potential for monetization is clearer.

Analysts remain divided on Meta's valuation. A blended price target of $837 per share reflects slightly lower margin assumptions but higher long-term growth expectations. Meanwhile, bullish investors argue that Meta's AI-driven ad performance and user engagement metrics position it to outperform in the coming years. The company's fair value estimate of $835.54 suggests the market has yet to fully price in the long-term potential of its AI infrastructure.

AI in the Metaverse: Beyond the Hype

Meta's AI investments are not confined to backend infrastructure; they are reshaping the metaverse itself. In 2025, the company has integrated AI into virtual environments to enable real-time personalization. For example, AI algorithms now adjust virtual spaces based on user behavior, such as rearranging a virtual bookstore's shelves to reflect a user's interests. Generative AI tools are also streamlining content creation, allowing developers to build 3D environments and interactive narratives from text prompts. These advancements are critical for scaling the metaverse, where user-generated content is a key driver of engagement.

User interaction is another area of focus. AI-powered dialogue systems enable avatars to engage in natural, context-aware conversations, enhancing immersion. In education, for instance, AI-driven virtual classrooms and historical simulations are transforming how students interact with content. These applications highlight the metaverse's potential to evolve beyond gaming and social networking into a platform for productivity and learning.

Risks and Rewards

Meta's aggressive AI spending is not without risks. The company's capital expenditures are expected to remain high in 2026, potentially weighing on near-term profitability. Critics argue that the payback period for these investments is uncertain, particularly in a market where AI adoption is still evolving. Additionally, Meta faces competition from cloud giants like Amazon and Microsoft, which have deeper pockets and more mature AI ecosystems.

However, these challenges also present opportunities. Meta's focus on AI infrastructure aligns with broader industry trends, and its metaverse ecosystem provides a unique testing ground for AI applications. The company's ability to sustain AI-driven monetization-particularly in advertising-will be critical to its long-term success.

Conclusion: A Long-Term Bet on AI

Meta Platforms is a case study in strategic reinvention. While its metaverse ambitions have been criticized as a financial drain, the company's pivot to AI infrastructure reveals a more nuanced story. With $72 billion allocated to AI in 2025 and a growing portfolio of AI-driven applications in the metaverse, Meta is positioning itself as a leader in the next phase of the internet. At current valuations, the stock offers an attractive entry point for investors willing to bet on the long-term potential of AI.

As the metaverse evolves from a speculative concept to a tangible platform, Meta's AI infrastructure could become its most valuable asset. The question is not whether the company can build the technology-it already has-but whether the market will recognize its worth before it's too late.