Meta Platforms (META -0.46%) seemed to be left by the wayside not too long ago. The stock languished as investors worried about slowing growth for Facebook and mounting losses from the company’s investments in the metaverse.
It’s a much different story now. Meta’s share price has skyrocketed close to 150% year to date. There’s growing excitement about the company — and especially the opportunities that artificial intelligence (AI) will create.
But the story could be even better than many realize. In Meta’s recent third-quarter earnings call, founder and CEO Mark Zuckerberg revealed the key advantage of the company’s AI strategy that many investors may be overlooking.
Meta’s AI strategy
Like most other technology giants, Meta is dramatically ramping up spending on AI. Zuckerberg proclaimed that “AI will be our biggest investment area in 2024.”
The company has already launched its new Meta AI assistant. The app can access real-time information to answer questions. It’s available on all of Meta’s messaging apps, as well as the latest version of the Ray-Ban Meta smart glasses.
Just as Apple, Microsoft, Alphabet, and Amazon are doing, Meta is especially focusing on generative AI. Zuckerberg said that the technology “will be increasingly important going forward.”
However, Meta is using other types of AI to boost profits. So far in 2023, the amount of time users spend on Facebook and Instagram has increased by 7% and 6%, respectively, thanks to AI-driven feed recommendations. The more time spent on the apps, the more advertising revenue that Meta is able to generate.
But the main thing that differentiates Meta’s AI strategy is its open-source approach. Zuckerberg noted that the company has “a pretty long history of open-sourcing parts of our infrastructure.” He stated that a major reason behind this practice is that it fosters increased adoption, which can lead to faster innovation. Meta ultimately benefits from this innovation.
Zuckerberg said that Meta’s Llama 2 foundation AI model had more than 30 million downloads in September alone. The company believes that Llama 2 now ranks as the top open-source AI model in the world.
A potentially overlooked advantage
There’s another advantage to Meta’s open-source AI strategy, according to Zuckerberg. And it’s one that could be widely overlooked.
The more Meta’s AI models are used, the easier it will be for the company to attract the best and brightest engineers and researchers. Zuckerberg said in the Q3 call, “[A] lot of people want to go to the place to work where their work is going to touch most people. One way to do that is by building products that billions of people use.”
It’s difficult to put a dollar amount on exactly how much value this hiring advantage provides to Meta. However, Zuckerberg’s argument certainly has plenty of merit. That’s especially true in the fast-moving tech world in which Meta operates.
Skeptics could raise the objection that this competitive advantage from Meta’s AI strategy is minimal, since the company instituted a hiring freeze in late 2022. But CFO Susan Li stated that Meta has now resumed hiring. She explained that the company’s 2024 budget prioritizes hiring in four key areas. Li said, “Of those areas, we expect AI to be the largest area of increased investment as we further invest in generative AI across our core products, internal tooling, and research efforts.”
Is Meta Platforms stock a buy?
In my opinion, Meta Platforms stock isn’t a great pick for investors just because of the hiring advantage that its open-source AI strategy might provide. However, I do think that it’s something for investors to consider.
More important, though, is Meta’s overall value proposition. The company’s social media platforms continue to attract more than 3 billion daily users and nearly 4 billion users each month. That’s an audience that advertisers simply can’t ignore.
Meta’s cost-cutting initiatives are clearly paying off. Its Q3 profit was the highest in the company’s history. AI is helping on this front as well.
Despite the phenomenal gains achieved this year, Meta stock remains attractively valued in light of its future growth prospects. If the company’s AI open-sourcing strategy indeed attracts the best people who then create new opportunities for Meta, those prospects could get even better.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.