Is Meta the Best Magnificent Seven Stock to Buy After Its AI Agent Topped the App Store?

Meta Platforms (NASDAQ:META), the parent company of Facebook, has lagged broader equities over the past 12 months. One reason for its poor performance is that some investors worry about the company's heavy spending on artificial intelligence (AI). If Meta's investments fail to yield the returns it hopes for, the tech giant's revenue growth could slow while its profits and margins shrink. In fact, during the second quarter, Meta's net income and free cash flow declined meaningfully year over year.

However, more recent developments suggest Meta's strategy might pay off after all. Here's what investors should know.

Image source: The Motley Fool.

Meta's popular AI agent

On Sept. 8, Meta Platforms released Muse, an AI agent designed to help people accomplish various tasks by constantly working in the background. Muse goes beyond the question-and-answer format of AI chatbots and can proactively work toward goals and take things off its users' to-do lists. The release of Muse was hardly a surprise. Meta's CEO, Mark Zuckerberg, had explicitly said that his vision of AI included personalized agents. But would people embrace this vision? We now have a tentative answer to that question, and it is in the affirmative.

Five days after Muse's release, it topped the U.S. App Store's list of the most popular free apps. It had already recorded about 730,000 downloads. This provides some evidence that AI agents could become highly popular. Meta's spending on AI infrastructure enabled the company to build increasingly capable AI models, which now power products such as Muse, a sophisticated AI agent. But this could only be the beginning for Meta Platforms. We can likely expect Muse to become increasingly capable, and perhaps Meta will launch other AI agents in the future.

How could this affect the company's financial results? Muse is free to download and use within certain limits; beyond that, there are paid subscription tiers. Provided Meta can get enough paid subscribers, it could become a meaningful source of revenue for the company. We are not there yet, of course, but these recent developments paint a much brighter future for Meta than its stock performance over the past 12 months suggests. It's not surprising that the stock has soared by more than 20% since it released Muse.

Is Meta stock a buy?

Meta's AI spending has been intentional, and although it has weighed on short-term profits and free cash flow (with other factors also affecting its recent profitability), the company is now showing the potential of its strategy. There could be more in the near future. Meta has reportedly been looking to sell excess AI computing capacity. Management pointed out that, given the current demand for these services, the company could sell compute at a significant premium over what it paid for it.

Meanwhile, the core advertising business remains healthy, and Meta continues to grow its ecosystem. Second-quarter revenue increased by 28% year over year to $60.8 billion, while daily active people came in at 3.60 billion, 3% higher than the year-ago period. Meta's deep ecosystem is a strong competitive advantage, offering it numerous monetization opportunities. Lastly, the company has moved closer to addressing another issue.

Meta has faced lawsuits over alleged social media harm, but it recently reached a settlement with many of the plaintiffs. Meta agreed to pay about $18 billion over a 10-year period -- a fairly small amount for a company that generates more than $60 billion in annual profits -- and put more guardrails on its websites and apps to protect young users. For all those reasons, Meta's stock looks attractive for investors willing to hold onto it for the long term.

The best Magnificent Seven stock?

Meta might be an attractive stock to buy, but whether it's the best Magnificent Seven stock right now is another question. The Magnificent Seven group includes Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA). Some of them are performing particularly well, even as they have also declined meaningfully over the past 12 months. That's the case with Microsoft, for instance. Meanwhile, the likes of Alphabet and Nvidia are seeing accelerating sales growth and boast outstanding medium-term prospects, given the AI industry's rapid expansion.

We could also point out Apple's recent launch of the iPhone 18 and the iPhone Duo, its first foldable smartphone, which may prove extremely popular. Is Meta really a better stock to buy than all of them? I don't think so. Nvidia in particular looks highly attractive. It has a near-impregnable moat in its core GPU (graphics processing unit) market, continues to post outstanding results, and has expanded its product portfolio to capitalize on the agentic AI boom. Yet, the market still underestimates the semiconductor specialist.

Meta and Nvidia are both in my portfolio, but if I had to pick just one to double down on right now, it would be the latter.

Prosper Junior Bakiny has positions in Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.