Meta Soared 11.3%, What’s Fueling This AI-Driven Earnings Surge?

Summary
• Meta (META) surged 12% in pre-market trading, closing at $773.87 after reporting Q2 earnings of $7.14/share and $47.5B revenue.
• The stock traded between $765.51 and $784.7, hitting the 52-week high of $784.7.
• Analysts at Citi and Morgan Stanley highlighted Meta’s AI capital expenditures and hiring blitz as catalysts for long-term growth.

Meta’s explosive 11.3% intraday gain underscores its role as a linchpin in the AI-driven tech rally. The stock’s surge followed a blockbuster earnings report, with capital expenditures projected to hit $66B–$72B for 2025. Analysts are bullish on Meta’s AI infrastructure investments and their ripple effects on chipmakers like AMD and Broadcom, while leveraged ETFs like METU and FBL surged 22%+.

Earnings Outperformance and AI Capital Expenditure Drive Meta’s Surge
Meta’s 12% rally was fueled by a Q2 earnings report that handily beat expectations. The company reported $7.14/share in EPS and $47.5B in revenue, driven by 22% year-over-year revenue growth and a 36% jump in net income. Analysts highlighted the $66B–$72B full-year capex guidance, up from $64B–$72B, as a major catalyst. Citi analysts noted this spending will directly benefit chipmakers like AMD and Broadcom, while Morgan Stanley praised the core business’s strength despite concerns over AI spending. The stock’s breakout above the 52-week high of $784.7 suggests momentum is being driven by both short-term earnings optimism and long-term AI infrastructure bets.

Application Software Sector Rally Led by Meta and Microsoft
The Application Software sector mirrored Meta’s gains, with Microsoft (MSFT) rising 3.89% on $76.44B in Q4 revenue and $27.23B in net income. Both companies’ AI investments are reshaping the sector, with Microsoft’s $30B+ capex in FY25 and Meta’s $66B–$72B plan creating a tailwind for chipmakers and cloud infrastructure providers. Barclays analysts reiterated an overweight rating on Microsoft, citing its generative AI momentum, while Citi noted that Meta’s capex will likely boost AMD and Broadcom sales. The sector’s strength is evident in leveraged ETFs like METU and FBL, which surged 22%+ alongside Meta’s move.

Options and ETFs to Capitalize on Meta’s AI-Driven Momentum
• 30-day MA: 712.42 (below current price); 200-day MA: 627.36 (well below)
• RSI: 32.56 (oversold); MACD: 2.54 (bullish divergence from -3.65 histogram)
• Bollinger Bands: Price at 773.87, above the upper band of 731.94, signaling strong momentum.

Meta’s technicals suggest a continuation of its AI-driven rally. Key levels to watch include the 30D support at 712.45 and the 200D support at 580.96. The RSI at 32.56 indicates potential for a rebound, while the MACD’s positive divergence suggests sustained buying pressure. Leveraged ETFs like METU and FBL offer 2x exposure to Meta’s move, with FBL up 22.56% and METU up 22.32% in a single session.

Top Options Picks:
• META20250808C775: Call option with strike at $775, expiring 8/8. Key stats: IV 28.79% (moderate volatility), Leverage 56.88% (high), Delta 0.5008 (moderate sensitivity), Theta -2.46 (significant time decay), Gamma 0.0114 (high sensitivity to price swings). Turnover: $3.7M. A 5% upside from $773.87 would yield a 200%+ payoff.
• META20250808C780: Call option with strike at $780, expiring 8/8. Key stats: IV 27.38% (reasonable), Leverage 72.63% (very high), Delta 0.4405 (moderate), Theta -2.22 (strong time decay), Gamma 0.0119 (very high sensitivity). Turnover: $8.6M. A 5% move would push the payoff to ~$95/share, offering a 25%+ return on strike.

Aggressive bulls should consider META20250808C780 into a breakout above $780, while conservative traders might target META20250808C775 for a 5% upside scenario. Both options are well-positioned for continued AI-driven momentum.

Backtest Meta Stock Performance
The backtest of Meta's performance after an intraday surge of 11% shows favorable short-to-medium-term gains, highlighting the potential for positive returns following such events. The 3-Day win rate is 52.44%, the 10-Day win rate is 58.93%, and the 30-Day win rate is 64.12%, indicating a higher probability of positive returns in the immediate aftermath of the surge. The maximum return during the backtest period was 6.99%, which occurred on day 59, suggesting that while there is potential for gains, the optimal return period may not always coincide with the immediate day or week following the surge.

Meta’s AI Bet Could Fuel a New Era—Here’s How to Play It
Meta’s 11.3% surge is not just a reaction to earnings but a signal of its long-term AI ambitions. With capex guidance raising to $66B–$72B and AI hiring accelerating, the stock’s technicals and fundamentals align for a multi-month rally. The sector leader, Microsoft, rose 3.89%, reinforcing the broader AI infrastructure narrative. Investors should watch for a break above $785 to confirm a new bullish trend, while leveraged ETFs like FBL and METU offer amplified exposure. For now, the path of least resistance is higher, with options like META20250808C780 providing high-leverage entry points. If $780 holds, the 52-week high of $784.7 could be the next target.