The Significance of Big Tech: Meta Platforms in the Focus of AI Investments

The sharp increase in attention to Artificial Intelligence (AI) has prompted investors to strategically align their portfolios. Amidst this dynamic, Meta Platforms stands out as the third-ranked candidate that deserves closer examination, not least due to its massive investments in AI. Venu Krishna, Head of U.S. Equity Strategy at Barclays, recently commented on CNBC regarding the S&P 500 year-end target of 5,600 points. Despite current challenges, including declining profit figures, he maintains his forecast. In his assessment, it is primarily the strong foundation of major tech stocks that supports the market currently, even if their profit performance appears stagnant. Particularly in October, traditionally the weakest month on the stock market, he believes a cautious approach is required. Stephanie Roth from Wolfe Research pointed out in the same segment the latest Fed minutes released on October 9. While a majority of Fed officials advocate for a 50 basis point rate cut, no such move is expected for the upcoming meeting. To succeed in the market, some investors, including hedge funds, are specifically examining AI stocks that are of interest to investors. Gene Munster from Deepwater Asset Management highlighted Meta Platforms, especially regarding its ambitious AI projects and the competition with Apple. Meta's focus is on enhancing user interactions through innovative AI models, which in the long run should increase monetization of its vast user base. Meta Platforms' financial solidity, supported by a remarkable free cash flow margin of around 30%, could make investors optimistic despite the high level of spending on AI. By the end of the year, the company could achieve free cash flow of $50 billion. If the current trend continues, next year promises even up to $58 billion. These figures secure Meta a prominent position in the AI industry's spotlight and offer a solid foundation for long-term investments.