This AI Giant Aims to Reach $9 Trillion in Market Cap. Is the Stock a Buy?

Last year, artificial intelligence (AI) giant Nvidia reached a massive milestone. The company surpassed tech stalwarts Microsoft and Apple to become the world's biggest company by market value. Nvidia soared past those rivals -- which over the past few years had each occupied the spot -- and even became the first to reach a market capitalization of $4 trillion.

So you might expect me to say that Nvidia now aims to reach $9 trillion in market cap -- or that Microsoft or Apple have set such a goal.

But another AI giant, one that's underperformed many of its peers in recent times and actually is the cheapest of the Magnificent Seven tech stocks, just made a move that suggests it's working toward that enormous market cap goal. The company offered certain executives stock options linked to market value reaching $9 trillion by 2031, according to The Wall Street Journal. Let's find out more -- and consider whether the stock is a buy.

Image source: Getty Images.

From social media to AI

The AI player that I'm talking about is Meta Platforms (NASDAQ: META). You may know this company more for its social media presence than for AI, as it owns some of the world's most popular apps -- from Facebook to Instagram. But Meta also has been focusing on AI in recent years, and it's actually designated the technology as a key growth area.

Meta has gone all in on AI, developing its own large language model, building out data centers, and even forming a superintelligence lab. To power its AI goals, the company has made acquiring and keeping talent a priority. Last year, Meta bought a stake in Scale AI and hired its co-founder, Alexandr Wang, to join Meta as chief AI officer.

And in recent days, Meta has taken another step to offer certain executives an incentive to stay and help push the company to new heights. Meta is offering several executives, including chief financial officer Susan Li and president Dina Powell McCormick, stock options that will pay out based on Meta reaching a specific share price.

The options include several tranches, with the lowest being a stock price of $1,116.08 and the highest being a stock price of $3,727.12. This would imply gains of 88% or more than 500%, respectively, from Meta's March 25 closing price of about $594. And it would equal a market value of more than $2 trillion at the lowest and $9 trillion at the highest.

Could the company reach this ambitious goal?

Now, the question is: Should you buy this ambitious AI player? First, it's important to take a closer look at these goals. Considering the average analyst forecast for Meta revenue of $296 billion in 2027, the company could reach a market value of $2 trillion. That would imply a price-to-sales ratio of 6.7, in line with its PS ratio today.

META PS Ratio data by YCharts

However, that level of sales at a market value of $9 trillion would leave Meta with a PS ratio of more than 30. This is unlikely from a mathematical perspective. And the short time period to achieve this market value goal would make it very difficult for Meta's revenue to soar well beyond the 2027 analyst predictions -- and become more supportive of a $9 trillion market value.

That said, I wouldn't let this stop me from buying Meta stock. This initiative shows the company is eager to grow and hold onto top employees. Meta is highly profitable thanks to the strength of its social media business, which attracts advertising. And the company's potential successes in AI could boost this key business and expand revenue opportunities over time.

Meanwhile, trading for only 19x forward earnings estimates, Meta looks dirt cheap, offering investors a great buying opportunity. Even if Meta doesn't reach $9 trillion in market value in a few years, that's OK. The stock still is well-positioned to advance as this AI boom progresses, and that's an excellent reason to add it to your portfolio, especially at today's price.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Meta Platforms, and Microsoft and is short shares of Apple. The Motley Fool has a disclosure policy.