In Mark Zuckerberg's brave new world of advertising, artificial intelligence will do everything. Advertisers on Facebook and Instagram will simply punch in a few lines of text detailing what they need. Then an AI chatbot will do all the work, from crafting a strategy to creating a brand image and even composing a jingle.
That vision hasn't arrived. But Meta stock already is moving higher in anticipation as Zuckerberg executes a stunning AI blitz.
"Any business will be able to just tell us what objective they're trying to achieve, like selling something or getting a new customer, how much they're willing to pay for each result and connect their bank account, and we just do the rest for them," the CEO said at the Meta Platforms shareholder meeting in May.
What The AI Offensive Means For Meta Stock
The bold vision aims to capture a bigger chunk of the estimated $1 trillion advertising market. The plan is also a crucial part of the Facebook parent's grand strategy as it goes all-in on AI.
Meta's AI offensive will likely be a key focus when the tech giant reports second-quarter earnings on July 30, especially given a dizzying recent run of news and updates. Zuckerberg earlier this month pledged to spend "hundreds of billions" on AI infrastructure, including toward a Manhattan-size data center.
Hiring is also going full-tilt. Meta has reportedly offered $100 million pay packages to lure top researchers from AI rivals like OpenAI and Apple.
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For Meta Stock, It's 'Do Or Die' In AI
Mark Malek, chief investment officer at Siebert Financial, said the aggressive hiring spree is "a really smart long-term bet for Meta."
Meta is looking for top talent as it competes to be an AI leader against fellow tech giants like Google parent company Alphabet, Microsoft, Amazon.com and trailblazing upstarts like OpenAI.
"AI, right now, is do or die for Meta," Malek told Investor's Business Daily.
Investors appear to support the AI blitz. Even with a slight pullback this month, Meta stock sits about 21% higher year-to-date. That only trails the 25% gain for Nvidia, making the two the best among Magnificent Seven stocks this year.
To pay off that optimism, Meta will need AI to boost its advertising business. Zuckerberg told analysts in April that improved advertising is the first opportunity for Meta to benefit from its AI investments. Opportunities like business chatbots and AI-enabled products like smart glasses would come later.
Powered by a user base of more than 3.4 billion daily users across Facebook, Instagram and its "Family of Apps," Meta is expected to capture 22% of all U.S. digital advertising spending in 2025, according to EMarketer estimates. That only trails Google's 25% estimated U.S. market share.
In turn, Meta's business depends heavily on growing the digital ad market. Even with Zuckerberg's metaverse investments and other attempts to diversify, advertising contributed roughly 99% of Meta's $164.5 billion in 2024 sales. That makes Meta much more of a one-trick-pony than its megacap tech peers.
How Zuckerberg Aims To Upend The Ad Industry
Now the $1.8-trillion-dollar-market-cap tech company, which changed its name to Meta from Facebook in 2021, hopes to move quickly on a vision to reshape how advertising is done.
The Wall Street Journal reported in early June that Meta planned to offer tools allowing brands to "fully create and target ads using artificial intelligence" by the end of next year.
The news rattled the advertising world. While Meta stock rallied to a three-month high the day of the report, shares of agencies like Omnicom Group, WPP PLC and Interpublic Group slid.
Creative Work Is In Zuckerberg's Focus
Meta has already rolled out new tools in recent years that help automate parts of advertising. The tech giant is eyeing a bigger chunk of that market.
"Zuckerberg has called this a redefinition of advertising," EMarketer analyst Jasmine Enberg told IBD. "In many ways — if this comes to fruition — he'll be right."
AI automation could help make advertising more productive and effective, Zuckerberg told investors in late May, helping the overall industry grow larger. Meanwhile, analysts note that the vision for more automation would drive more of the overall process for ads onto Meta's platform.
"Meta hasn't really been able to do that creative output side — that has been relegated to agencies, with a lot of money brands are spending going to creative agencies to design ads," Jake Teeny, an assistant professor of marketing at Northwestern University's Kellogg School of Management, told IBD. "That's lost money for Meta."
How Meta Stock Bounced Back
AI has long been a focus for Meta.
The social media giant has spent more than a decade developing tools to automate how businesses promote their products online, for everything from how the ad looks to who will see it.
In fact, AI helped bail Meta stock out of a deep slump three years ago.
In the summer of 2022, Meta launched Advantage+, an advertiser platform that uses AI algorithms to help brands more quickly launch campaigns and anticipate which audiences to target. A year later, Meta reported that the product had reached a $10 billion annual revenue run rate.
That helped Meta stock come roaring back in 2023 from app privacy policy changes by Apple in 2021 that hit Meta's ad revenue, plus a broader digital ad slump in 2022.
After its ad sales declined 1% in 2022, Meta posted a 16% increase in advertising revenue in 2023 and a 22% rise in 2024.
Meanwhile, Meta stock has rallied more than 700% from a late-2022 nadir.
The ChatGPT Revolution
OpenAI's launch of ChatGPT in late 2022 prompted Meta to ramp up its AI game plan. That drive has only intensified this year.
In April, Zuckerberg told investors that the company planned about $68 billion in capital spending this year. That would represent roughly 35% of the company's 2025 projected revenue, according to FactSet, up from 24% last year and 16% back in 2021.
That's money focused on building data centers with advanced computing chips to help Meta train and operate AI models.
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Meta in 2023 released its Llama large language model, which powers the Meta AI chatbot. Zuckerberg recently said the tool has reached more than 1 billion monthly users.
But Meta's latest Llama release ranks behind offerings from Google, OpenAI, Anthropic and Chinese startup DeepSeek, among others, according to the LM Arena, a crowdsourced project that tests the power of large language models.
Zuckerberg is sending strong signals that Meta is gearing up for an even bigger AI push.
Meta Capex Rising
| Year | Capex spending (bil) | Total revenue (bil) | % of revenue |
|---|---|---|---|
| 2019 | $16 | $71 | 22% |
| 2020 | 16 | 86 | 18% |
| 2021 | 19 | 118 | 16% |
| 2022 | 32 | 117 | 27% |
| 2023 | 28 | 135 | 21% |
| 2024 | 39 | 165 | 24% |
| 2025 (estimates) | 66 | 188 | 35% |
Source: FactSet |
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Meta AI Blitz
The company recently struck a deal to invest $14.3 billion in Scale AI, a startup focused on providing data to train AI models. A key component of the deal was that Scale AI Chief Executive Alexandr Wang joined Meta to lead the newly created Meta Superintelligence Labs.
The Scale AI deal was the first in a series of headline-grabbing moves by Meta to build out its superintelligence-focused lab with top talent. Meta offered top OpenAI talent $100 million bonuses, OpenAI Chief Executive Sam Altman said on a podcast last month.
Meta has reportedly hired at least 10 OpenAI researchers — including key developers of the startup's GPT-4 model — plus top talent from Anthropic, DeepMind and GitHub.
Its latest win: Ruoming Pang, who led Apple's foundation models team. Meta offered a multiyear compensation package worth more than $200 million to secure Pang's services, according to Bloomberg.
Zuckerberg recently told The Information that some of the reported pay details for recent hires aren't accurate. But he said Meta is responding to a hot market.
"If you are going to be spending hundreds of billions of dollars on compute and building multiple gigawatts of (data center) clusters, then it makes sense to compete super-hard to get 50 or 70 top researchers to build your team," Zuckerberg said.
Building An AI Moat To Protect Meta Stock
Gene Munster, managing partner at Deepwater Asset Management, described Apple's loss as a big win for Meta.
"I believe that the strategy of investing aggressively — whether it's through acquisition, partnership or hiring — is the right approach," he told IBD.
That view is shared by Malek of Siebert Financial.
"The way to really ensure and build a moat right now is to hire the greatest talent that's out there," he said. "And right now it's a very small talent pool."
The recruiting blitz has amped up a rivalry between Meta and upstart OpenAI. "It's unethical (and reeks of desperation) to give people 'exploding offers' that expire within hours," OpenAI's head of recruiting, Joaquin Quinonero Candela, recently wrote on X.
Why Meta Ad Revenue Is Key
In a July 14 Threads post, Zuckerberg affirmed Meta's "superintelligence effort."
"We're also going to invest hundreds of billions of dollars into compute to build superintelligence," Zuckerberg said. "We have the capital from our business to do this."
Indeed, Meta has plenty of resources to work with. Analysts polled by FactSet project the company will generate operating income of $73.7 billion in 2025, up about 6% from last year. Still, that's a sharp slowdown from the 48% rise in Meta's operating income in 2024.
Investors shrugged off Meta's rising costs last year because its ad business was humming. Its overall ad revenue growth last year of 22% outpaced the 14% growth of its largest rival, Google, and the 20% growth rate for Amazon's smaller but fast-rising ad business.
But Meta stock analysts are forecasting the company's advertising revenue growth to slow to about 15% this year, as the company faces tougher yearly comparisons and concerns about tariffs.
Any further ad revenue growth slowdown could heighten concerns about rising AI costs.
"If there is weakness, we think investors will send Zuckerberg a powerful reminder via their sell orders, like how they reacted when the company was investing in Reality Labs as Apple's App-Tracking Transparency framework pummeled its core digital ads business in 2022," Morningstar analysts wrote in a preview of Meta's Q2 report.
BofA analyst Justin Post recently told clients that Zuckerberg's AI commentary is a "sign of confidence" for Meta's revenue trajectory.
But "we expect AI investment to be a top focus area on the upcoming earnings call," he said in a client note.
Meta AI Tools Seen As Potential $30 Billion Boost
But Meta has been touting the expanding use of AI in its digital ad business.
Zuckerberg said on the company's first-quarter earnings call that a new AI model for recommendations on its Reels video product increased ad conversions by 5%. The company also disclosed that roughly 5 million advertisers were already using its generative AI ad creative tools.
New Street Research analyst Dan Salmon estimates that generative AI creative tools could boost Meta's annual advertising revenue growth by 1% to 2% over the next several years and provide a 4% tailwind to ad revenue growth by the end of the decade. That would represent a roughly $28 billion boost by 2030, according to a recent client note from Salmon.
Meanwhile, tech industry analyst Ben Thompson argued late last year that Meta could be "best-positioned" to quickly provide a bottom-line benefit from rising AI costs. Meta enjoys a potential advantage "thanks to the obvious benefit of applying generative AI to advertising," Thompson wrote in a blog post.
But Meta's AI offensive also poses risks to the tech giant, Thompson also said in another blog post. "The fact that there are so many upside scenarios for Meta with AI by definition means there is a lot of downside embedded in not getting AI right," he said.
Competition For AI-Powered Advertising
And there's also emerging competition when it comes to AI-powered advertising tools.
AI was the dominant theme at the annual Cannes Lions ad industry conference in France last month. Amazon rolled out an update to its video generator, which allows Amazon sellers and other advertisers to create videos from still images displayed on Amazon's website and other properties.
Google announced that it will integrate its Veo 3 AI-powered video generation tools into YouTube Shorts to make it easier for advertisers to create brand videos. Google has also been integrating image creation and other generative AI creative tools into its Performance-Max advertising platform.
Meanwhile, OpenAI is also looking to expand its advertising sales, including an ad-supported tier for ChatGPT.
Ad Industry Pushback Against Meta AI Ambitions
There are longer-term challenges given the size and scope of the industry Meta is looking to disrupt.
"There are a lot of small and medium-sized businesses who will appreciate these changes and appreciate more automation," EMarketer's Enberg told IBD. "But for a lot of big brands, they're not going to want to give up control and hand it over to Meta."
An "old guard" of the advertising world would be skeptical of relying solely on AI, the Kellogg School's Teeny argued.
"This has been their bread-and-butter, and if someone takes away your expertise, there is that existential crisis that we are seeing with AI across the board," Teeny said.
Andrew Foxwell, co-founder of the social media advisory firm Foxwell Digital, said AI is already widely integrated into Meta's overall advertising offerings. But some brands have found issues with the way Meta's AI tools adjust images or rewrite text, he told IBD.
"There is still quite a bit of pushback from a full adoption," said Foxwell, who runs a Slack group for Meta-focused advertisers.
He added, "The tools are there and to a certain degree we are utilizing them. But there are also pieces of the AI playbook Meta would like us to adopt that we haven't at this point."
Meta must also grapple with regulatory issues, amid concerns that the tools could be used to mislead consumers or spread misinformation.
"AI-generated ads are still fully subject to the same truth-in-advertising laws and regulations that apply to human-created content," Laura Smith, legal director for the watchdog group Truth In Advertising, told IBD.
Meta Stock Is Up 22% This Year
Amid debate about its AI plans, Meta stock is approaching its second-quarter earning report next Wednesday in strong shape.
After slumping in the spring on concerns about tariffs, Meta stock rallied to reach an all-time high of 747.90 on June 30.
Meta stock broke out above a 662.67 cup-with-handle buy point in early June, closing the month 14% higher. Shares have pulled back slightly in July, with a 3% decline so far.
In recent action, Meta has found support near its 21-day exponential moving average. Shares could also soon test Meta's 50-day moving average — a support level to watch ahead of the company's earnings results next Thursday.
