1 Trillion-Dollar AI Superstar That's Eating Netflix's Lunch
Key Points
Netflix shares have underperformed a dominant internet giant in recent years.
Given the popularity of mobile devices and user-generated short-form content, time spent on a well-known social media platform is surging.
Netflix is ceding viewership to streaming rivals, challenging rosy assumptions investors have about its growth prospects.
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Owning companies that successfully disrupt an industry to create an entirely new category can result in huge gains for investors. This is what Netflix (NASDAQ: NFLX) has achieved. Shares have skyrocketed an unbelievable 2,580% in the past 15 years (as of Jan. 30).
For a business whose primary purpose is to win attention, engagement is a crucial data point for investors and the leadership team to track closely. However, Netflix has some work to do here.
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This trillion-dollar artificial intelligence (AI) superstar is eating Netflix's lunch. And its shares have outperformed the streaming stock in the past one-, three-, and five-year periods.
Image source: Getty Images.
Meta is dominating the attention economy
In 2019, consumer behavior shifted, with adults spending more time on their mobile devices than watching TV. Given that Meta Platforms (NASDAQ: META) has long optimized its content for the mobile age, it's crushing Netflix when it comes to engagement growth, giving it a dominant position in the attention economy.
"Instagram Reels had another strong quarter, with watch time up more than 30% year-over-year in the U.S.," CFO Susan Li said on the fourth-quarter 2025 earnings call. The company is leveraging AI capabilities to improve content ranking. A new focus is to be more adaptive, showing content relevant to what a user is interested in during a particular session.
The streaming pioneer is seeing more muted gains. "In the second half of 2025, view hours increased 2% year over year," Netflix's Q4 2025 press release reads.
It's worth mentioning that Netflix households spend, on average, about two hours per day on the platform, much more than the half-hour or so that the average person spends daily on Instagram. However, it's the 30% growth that the social media service just registered that should keep Netflix executives up at night. The company is being proactive, working on improving its mobile user interface to support growth with vertical video formats.
Over the next five or 10 years, mobile devices will likely command more of our attention, with TVs losing that battle. This means that Meta, with its improving AI proficiency, is in a very favorable position to drive more engagement. And this can make things difficult for Netflix.
Fighting for eyeballs within the industry
Astute readers will point out that this isn't a fair fight, given that Meta focuses on user-generated content. But even in the streaming industry, Netflix is lagging. Over the past three years, Netflix's share of TV viewing time in the U.S. increased by 20%. The overall streaming market (excluding Netflix), though, saw its penetration rate rise by a more significant 92%.
It's a crowded field. The takeaway for Netflix shareholders is to perhaps temper growth expectations going forward.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Netflix. The Motley Fool has a disclosure policy.
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