Now is a great time to buy stock in this AI giant.
Like many investors, I am fascinated by the opportunities presented by artificial intelligence (AI). I agree with the prediction that AI could be as good as (or better than) the internet.
Which AI stocks are likely to be the biggest winners? Different people will have different answers to that question. Here are my picks for the best AI megacap stocks to buy right now.
One of the cheapest megacap AI stocks
I like many of the mega-cap leaders in AI, including most of the so-called “Magnificent Seven” stocks. However, evaluation is an important factor for me. Many AI stocks with market capitalizations of $200 billion or more trade at very high premiums.But but meta platform (meta 2.33%).
Meta's attractive valuation is the main reason I think Meta is the best megacap AI stock to buy right now. The company's stock trades at a forward P/E ratio of 22 times, lower than its peers. The stock's price-to-earnings ratio (PEG), based on analysts' five-year growth estimates, is just 1.02.
Some investors defended Meta following the company's first quarter update. The stock is down about 17%, mainly due to concerns that Meta is increasing capital spending as it focuses on its currently loss-making AI and Metaverse efforts.
In my view, this sale went too far. Meta achieved strong sales and profit growth in the first quarter. I think the company's investments in AI and Metaverse will pay big dividends over time. Meta CEO Mark Zuckerberg believes this will happen. During the company's first-quarter earnings conference, he said that investing in new technology expansion was “a very good long-term investment for us and for the investors who support us.” He emphasized that history has shown this.
How can you win the meta with AI?
AI is already transforming Meta's operations. Zuckerberg noted during the first quarter conference call that about 30% of Facebook posts are served by the company's AI recommendation system, double the level from two years ago. Over 50% of his content on Instagram is recommended by AI. The more engaging content there is for users, the more attractive Meta's social media platform will be for advertisers.
Speaking of advertisers, Meta leverages AI to help advertisers improve their return on investment. Revenue generated through the company's two AI-powered tools, Advantage + Shopping and Advantage + App Campaigns, has increased more than 100% since last year.
Meta recently launched smart glasses with AI vision integration. Customers can ask the Meta AI assistant questions about what they're viewing. Zuckerberg believes there is “a meaningful market for fashionable AI glasses without a display.”
He sees multiple ways for Meta to profit significantly from AI beyond selling smart glasses. He is one of the possibilities to place advertisements and paid content in AI interactions. Charging for access to large-scale AI models is another reason.
Perhaps the biggest near-term opportunity is using AI for business messaging. Meta is already testing the ability for businesses to use AI assistants to interact with customers via chat. Zuckerberg said feedback from businesses and consumers so far has been positive.
timing is everything
Will Meta always remain my favorite megacap AI stock? Almost certainly not. New AI developments are happening at breakneck speed. There is a possibility that the meta rating will increase too much and it will lose its appeal. Other AI stocks could fall, creating a big buying opportunity.
In a year, I might like it alphabet, Amazon, Nvidia, or a meta who is the leader of an AI bigger than me. But for now, meta ranks at the top of my list.
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. Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Keith Speights has held positions at Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.