Is Meta Stock a Buy After Its AI Spending Spree?
Key Points
Meta Platforms has invested heavily in AI and plans to ramp up spending even more in 2026.
These AI investments have drawn comparisons to Meta's costly metaverse venture.
The key difference is that Meta's AI spending is already driving growth for its ad business.
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Meta Platforms (NASDAQ: META) plummeted after its third-quarter earnings report, largely due to the company's significant artificial intelligence (AI) spending -- and plans to spend even more in 2026. From Oct. 29 to Nov. 20, Meta's share price fell 22%, from $752 to less than $600.
Investors are concerned that AI will become the next metaverse, which has cost Meta over $70 billion since 2021. However, there's a crucial point that many are overlooking.
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Meta's AI investments are paying off
The metaverse has been a money pit so far, and there's a good chance it will never pay off in a meaningful way. AI, on the other hand, is already providing legitimate value for Meta. The social media company has integrated AI tools into its ad products, enabling companies to optimize ad designs, set up automated rules that pause or boost ads based on performance, and receive AI-powered ad insights.
These tools have contributed to better ad engagement, higher prices, and more money for Meta. Ad impressions were up 14% year over year in the third quarter of 2025, and the average price per ad increased by 10% year over year. Revenue for the first three quarters of the year was $42.3 billion (a 16% year-over-year increase), $47.5 billion (a 22% increase), and $51.2 billion (a 26% increase).
With $44.8 billion in trailing free cash flow (FCF), Meta can afford to make substantial investments in AI. While the metaverse flashbacks are understandable, AI spending could be a winning move for Meta. I still consider the company a buy, and I've been picking up shares during the dip.
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Lyle Daly has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
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