Meta Platforms' AI Infrastructure Bolsters Spending Confidence: BofA Analyst

Meta Platforms' AI infrastructure builds confidence, signaling higher spending, according to BofA. Net sales break down by activity, with 98.6% coming from the operation of social networking platforms and 1.4% from the sale of virtual and augmented reality products. Sales are distributed geographically, with 39.2% in the US and Canada, 26.8% in Asia-Pacific, and 23.1% in Europe.

Meta Platforms (META) has announced significant plans for AI infrastructure, signaling confidence in its current trajectory and potentially signaling higher spending in the future. According to BofA Securities analyst Justin Post, the company's AI spending plans, which include a goal to unlock AI superintelligence, show a strong commitment to innovation and growth [1].

Post raised his price target for Meta stock to 775 from 765, citing the company's ambitious AI spending plans as a key factor. Meta's AI infrastructure spending will support its AI efforts, including the development of multigigawatt data centers, and is expected to be a focal point during the company's upcoming second quarter earnings call [1].

The AI infrastructure spending pledge follows Meta's recruitment of several researchers from OpenAI and other competitors to launch a lab dedicated to AI superintelligence. The company also recently struck a deal to invest $14.3 billion in the startup Scale AI, with former Chief Executive Alexandr Wang joining Meta to lead the new AI research lab [1].

Post raised his estimates for Meta's 2025 revenue by roughly 1%, citing improved economic conditions and improvements to Meta's advertising technology. However, he also slightly lowered his estimates for Meta's 2026 adjusted earnings by a fraction, citing higher research and development costs [1].

Meta's AI investments are expected to drive product-driven advertising upside, including spend automation, personal targeting, and messaging services, which could further boost optimism and drive price-to-earnings multiple expansion [1].

While Reddit (RDDT) also invests heavily in AI to enhance its advertising capabilities and user experiences, Meta Platforms' diverse business model, proven AI implementation, and multiple revenue sources, including advertising improvements and business messaging, provide lasting competitive advantages [2].

Meta Platforms' net sales break down by activity, with 98.6% coming from the operation of social networking platforms and 1.4% from the sale of virtual and augmented reality products. Sales are distributed geographically, with 39.2% in the US and Canada, 26.8% in Asia-Pacific, and 23.1% in Europe [1].

Meta Platforms' AI infrastructure spending builds confidence in the company's future growth prospects, signaling higher spending and potentially higher earnings in the coming years.

References:
[1] https://www.investors.com/news/technology/meta-stock-zuckerberg-ai-spending-price-target-hike/
[2] https://www.nasdaq.com/articles/rddt-vs-meta-which-social-media-ad-stock-has-edge-right-now