Meta Trades at a Discount to Magnificent Seven After $1 Trillion AI Rally

Meta Platforms Inc.’s record-breaking, artificial intelligence-fueled rally has added $1 trillion in market value since its darkest days of 2022, and yet by some perspectives it’s still trading at a discount.

Its shares traded at 24 times estimated earnings early Wednesday, roughly in line with their 10-year average and just below the 25 times of the Nasdaq 100. Among the Magnificent Seven group of big tech companies, only Alphabet Inc., with a multiple of about 21, is cheaper.

Artificial intelligence is the biggest driver of gains and the largest future tailwind investors see for the stock. Meta has been heavily investing in AI to improve ad targeting and recommend content to its massive user base, a bet investors see paying off big time. Profits tripled in the social media giant’s most recent quarterly report while revenue growth surged. The earnings were so strong that Meta also announced a $50 billion buyback program and implemented a dividend.

“Outside of chip or hardware companies like Nvidia or Dell, no company has benefited more from AI than Meta, just in terms of the impact on growth,” said Conrad van Tienhoven, a portfolio manager at Riverpark Capital. “There’s been a clear shift in Meta’s ability to target and measure ads through AI, and executing on this has set the company up for another five to seven years of growth.”

Meta has soared more than 450% from its nadir almost 18 months ago, including a gain of about 46% this year that’s behind only chipmaker Nvidia Corp. among the Magnificent Seven.

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