Metaplatforms (META +0.76%) wants to become a major player in the field of artificial intelligence (AI). Its applications are already widely used by billions of people every day, and AI could make them more useful. It can also help the company unlock more opportunities to grow its revenue at a high rate in the future.
It has invested billions in AI and last year created a new segment, Superintelligence Labs. The company recently unveiled its latest AI model, which its data puts it on par with other leading chatbots. Could this cause tech stocks, which are down 5% this year, to rally?
Image source: Getty Images.
Muse Spark compares favorably to other AI models
Meta’s new AI model, Muse Spark, is reportedly doing well on many key benchmarks compared to ChatGPT, Grok, and other popular models. The company also claims that its model is more efficient than others and requires less computing power. Investors seemed optimistic about the new model, as shares rose on the news.
The company has invested heavily in AI, and the big test will be whether or not the AI model will be profitable and unlock significant growth potential for the company. Customers have many options to choose from these days, and even OpenAI is struggling with profitability despite ChatGPT’s rising popularity. Meta’s focus on efficiency is a good strategy, but whether Muse Spark will help grow the company’s profits is by no means a certainty.
Meta also doesn’t have the best track record when it comes to spending big on technology, having invested billions into the metaverse, which has been nothing but a drain on its finances. The risk is that the AI strategy will ultimately follow the same path.
Today’s change
(0.76%)$4.80
Current price
$634.66
Key data points
Market capitalization
$1.6 tons
Day range
$624.40 -$634.95
Range of 52 weeks
$479.80 -$796.25
Volume
2.1K
Avg. full
16M
Gross margin
82:00%
Dividend yield
0.33%
Are Meta shares worth buying today?
The launch of a new and competitive AI model may be encouraging news for Meta investors, but it is far from a game changer for the company. The sheer number of AI models available today will only make it harder for the company to make profits, as intense competition is not good for margins. Therefore, I wouldn’t buy the tech stocks based on this news, and I doubt it will lead to a longer-term rally.
At 27 times earnings, Meta’s shares trade at a richer valuation than the S&P500 average of 24. While the growth rate has remained strong in recent quarters, the uncertainty surrounding high-tech spending and the legal battle over child safety makes the stock a bit too rich for the risk it poses; I would take a wait and see approach with Meta Platforms.
