The company's stock price fell sharply recently following the release of its first-quarter results, but that shouldn't be enough to scare investors away.
Companies that seek to monopolize the artificial intelligence (AI) market continue to emerge like weeds. That includes many startups that most people have never heard of and probably never will. These smaller companies can be incredibly innovative, but trying to profit from the AI ​​boom by investing in private startups can be difficult and risky. Thankfully, there are many established companies in the market that should benefit from the rise of AI.
One of the most likely options in this space is none other than Facebook's parent company. meta platform (meta 0.63%) The market capitalization is $1 trillion. Let's take a look at why the stock price could double by 2030.
Dedicated to AI
Metaplatform makes most of its revenue from advertising. However, the company is rapidly implementing various AI initiatives to support and improve its existing key revenue streams, as well as power new revenue streams.
Perhaps Meta's most significant move in AI was the release of Llama, its first large-scale language model (LLM) last year. Llama is the backbone behind some of Meta Platforms' other AI-related products, including Meta AI, a virtual assistant.
The company's other products include Business AI, which helps businesses with customer support and a variety of other tasks.
These are initiatives that have not yet generated revenue, but Meta Platforms plans to double down and spend even more money building them. And some of Meta's AI-related efforts are actually helping generate meaningful revenue.
For example, the company used AI-powered algorithms to drive Reels (short-form video) recommendations on Facebook and Instagram. The more videos viewers come across that they like, the more time they spend on the platform and the more attractive they become to advertisers. This is a good illustration of network effects.
Reels haven't been around for that long, but Meta Platforms reports that they now account for over 50% of time spent on the Instagram app. Reels, long-form video and live video also continue to drive Facebook's growth, with the former accounting for the bulk of the growth, executives said.
In the first quarter, Meta Platforms' revenue increased 27% year-over-year to $36.5 billion, and earnings per share increased 114% to $4.71. Reels' growth is also thanks to Meta's AI business, which has contributed some of the company's strong performance.
The road to $2 trillion
Meta Platforms had strong first-quarter results, but investors were disappointed that the company continued to spend small amounts of money on increasing its AI efforts, which don't generate much profit. But that's a somewhat short-sighted position, at least in my view. Here's what we know: The AI ​​market is expected to grow rapidly in the coming years. Meta Platforms is already a leader in this space, thanks in part to Llama, a leading LLM.
The tech giant is also introducing various AI measures within its business. And the superpower of the meta is its huge ecosystem. In the first quarter, his daily active users across websites and apps totaled 3.24 billion, an increase of 7% year over year. This means that almost half of the world's population uses at least one of the company's products every day.
That makes Meta's ecosystem a magnet for businesses looking to attract customers. Meta also gives you the opportunity to test and find lucrative monetization opportunities. Combined with its efforts in AI, it seems likely that there will be significant future dividend payments, literally, as Meta recently started paying quarterly. And that's before even mentioning the company's current Metaverse efforts, which could also be very profitable.
Metaplatform boasts multiple opportunities and should continue to deliver solid financial results. For him to double its value over the next six years, he would need a compound annual growth rate of 12.2%, which is within the company's achievable range. Don't be surprised if Meta Platforms becomes a $2 trillion stock by the end of 2030.
Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Prosper Junior Bakiny is in charge of the meta position on his platform. The Motley Fool owns a position in and recommends Meta Platform. The Motley Fool has a disclosure policy.