Key Insights
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Many of the Magnificent Seven stocks are now much less expensive compared to a few months ago.
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Among these, Meta Platforms stands out as the least expensive.
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There are concerns in the market regarding Meta’s spending on artificial intelligence (AI).
The Magnificent Seven refers to a select group of some of the biggest and most influential technology companies, which includes:
- Nvidia
- Apple
- Alphabet
- Microsoft
- Amazon
- Meta Platforms
- Tesla
These companies rank among the top ten largest in the world, making their stock performance particularly noteworthy. Investors might consider purchasing these stocks when they’re at lower prices, as they typically don’t see significant discounts.
Meta Platforms: A Costly Option?
When valuing stocks, one useful metric is the expected price-to-earnings (P/E) ratio. Generally, these companies grow at about 10% each year, significantly influenced by emerging trends like AI. Arguably, it’s more beneficial to assess stocks based on what they’re projected to earn rather than their past performances.
From this angle, Meta appears to have the lowest future earnings ratio among its peers. Notably, Tesla was excluded from this analysis due to an extremely high P/E ratio.
Meta’s expected profit multiple is currently 21.1, compared to 21.9 for the S&P 500 index, which suggests that Meta could be undervalued when juxtaposed with the market.
Meta’s Heavy Investment in AI
As the parent company of various social media platforms like Facebook and Instagram, Meta is also vigorously investing in AI technologies, alongside developing hardware such as augmented and virtual reality glasses. While Meta promotes its advancements in AI, it should be noted that, for now, it primarily functions as an advertising business. This isn’t entirely negative, but does serve as a reality check for investors.
For Q4 2025, Meta reported a substantial revenue of $59.9 billion, a notable 24% increase from the previous year. That figure largely comes from advertising revenue, which accounted for $58.1 billion and generated a healthy operating profit. Meanwhile, its Reality Labs segment experienced a loss of $6 billion.
Despite heavy spending on AI initiatives, the returns so far have been less impressive. For 2026, they plan to significantly ramp up their AI investment, with projected expenditures between $115 billion and $135 billion. Meta maintains that they foresee improved operating income for 2026 compared to 2025, indicating ongoing growth potential.
The skepticism surrounding Meta’s spending on AI is understandable. Investors recall how CEO Mark Zuckerberg invested heavily in the Metaverse, which hasn’t produced the anticipated returns, leading to worries that the same might happen with AI efforts.
Until we see tangible profits from Meta’s AI ventures, it’s hard to envision the stock returning to its previous earnings premium. Yet, if you’re optimistic about AI and Meta’s strategy, this might present a good buying opportunity—though it may require some patience for real outcomes to manifest.
Should You Consider Meta Platforms Stock?
Before investing in Meta Platforms, it may be wise to weigh the opinions of analysts who have identified other stocks with strong return potential, excluding Meta from their recommendations.
For context, notable examples of worthwhile investments include Netflix and Nvidia, which have shown remarkable returns since their recommendation dates.
Currently, it’s vital to highlight that many portfolios constructed by analysts have outperformed the average market returns significantly.
