Meta Platforms Is Quietly Becoming One of the Market's Best AI Stocks to Buy. Here Are 3 Reasons Why.

When investors think of the biggest winners of the artificial intelligence (AI) boom, Meta Platforms (NASDAQ: META) probably doesn't usually come to mind. Not only has the stock suffered this year, with shares falling nearly 10% year to date, but the company is still thought of first as a social media company that sells ads, while the AI label goes to chipmakers and the biggest cloud computing providers.

Yet the irony is that AI may already be doing more for Meta's business than for almost any other company.

Meta's first-quarter revenue, helped by AI, rose 33% year over year to $56.3 billion -- an acceleration from about 24% growth just one quarter earlier.

Here are three reasons Meta is becoming one of the market's best AI stocks for investors to consider.

Image source: Getty Images.

1. AI is already a catalyst for Meta

AI is already foundational to Meta's business momentum.

The clearest evidence sits inside the feed. On Instagram, ranking improvements with the help of AI lifted time spent on Reels by 10% during Q1 -- and total video time on Facebook climbed more than 8% globally -- the company's largest quarterly gain in four years.

More time on the platform, of course, means more room for ad inventory. To this end, ad impressions across its apps rose 19% in the quarter, while the average price per ad increased 12%.

And the same AI-driven systems that are improving content ranking across its platforms are also helping each ad work harder. Management said that new ad-ranking models drove a more than 6% jump in conversion rates for one common ad format. And the annual revenue run rate of Meta's value-optimization tools, which steer ad budgets toward customers most likely to buy, has more than doubled over the past year to over $20 billion.

2. A distribution advantage few can match

Building good AI is one thing. Getting it in front of people is another -- and here Meta starts with an enormous head start. More than 3.5 billion people use at least one of its apps every day, so a new feature can reach a global audience as it rolls out.

That reach is already on display. After Meta rolled out Muse Spark, the first model from its new Meta Superintelligence Labs, along with a rebuilt version of its Meta AI assistant in April, sessions per user climbed by a double-digit percentage. And more than half a billion people on Facebook and Instagram now watch AI-translated videos every week. Further, business AIs that field customer questions for advertisers handled more than 10 million conversations a week by the time of the first-quarter call, up from about 1 million at the start of the year.

3. Spending backed by profits, not promises

But one problem for Meta is the high cost of scaling its AI infrastructure. To support its ambitious compute initiatives, Meta now expects capital expenditures of $125 billion to $145 billion this year -- up from a prior range of $115 billion to $135 billion and nearly double the roughly $72 billion it spent in 2025.

A commitment this large would strain many companies' balance sheets. But Meta is a financial fortress. Its spending is backed up by extraordinarily profitable operations. The social networking specialist's first-quarter operating income rose 30% to $22.9 billion, and it generated $32.2 billion in operating cash flow and $12.4 billion in free cash flow. Additionally, the company ended March with about $81 billion in cash and marketable securities.

In other words, the AI build-out is largely being funded by profits the core business is already generating.

Meta is also trimming its workforce and designing its own chips to fund the push more efficiently.

An attractive bet

Still, the boldest part of this growth stock's AI bet has yet to pay off. The new models are meant to power personal and business agents Meta can eventually monetize, but that business is still nascent. Further, Muse Spark's developer API has reportedly been delayed on multiple occasions.

But the reason Meta belongs in the AI conversation arguably isn't its more speculative long-term ambitions to build a superintelligence. Instead, it's that the technology is already lifting the advertising business that funds everything else, even while it waits for its longer-term initiatives to pay off.

"[T]he trend over the last few years seems clear that we are seeing an increasing return on the amount that we can improve engagement for people and value for advertisers," said Meta founder and CEO Mark Zuckerberg during Meta's first-quarter earnings call.

And the other part of the bull case is the stock's valuation. Trading at just 22 times earnings, the stock looks attractive relative to its impressive top-line momentum and considering the attractive economics of the underlying business.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.