Ever since February, Meta Platforms (META -1.65%) has been on a strategic push to integrate artificial intelligence (AI) into everything it does. While rival tech companies Microsoft and Alphabet have thus far dominated the headlines when it comes to introducing new ChatGPT-style innovations, it now looks like Meta Platforms is finally starting to catch up. At a companywide meeting in early June, Meta CEO Mark Zuckerberg highlighted some of the "incredible breakthroughs" on the way.
In its pivot to AI, Meta Platforms is starting to unveil new innovations at a rapid clip. Some of them are designed to augment the company's core business, of course, but others hint at entirely new product lines and entirely new revenue streams. That could be big for the company's future valuation. Let's take a closer look.
Improvement to existing products
The core use case for AI is to bolster Meta's existing products. At the companywide meeting in Silicon Valley, Zuckerberg detailed how generative AI might be able to improve the company's most popular products. What if you could modify your Instagram photos via text prompts? Or what if Meta could add AI chatbots with unique personalities to its existing Messenger and WhatsApp products?
Image source: Getty Images.
From my perspective, that's really just the tip of the iceberg for Meta. After all, the real business of Meta is advertising. At this summer's Cannes Lions event -- an important annual event for the global advertising industry -- the company highlighted ways that generative AI technology could be used to create entirely new types of ads. The goal, says Meta, is to accelerate the creativity of its advertising partners, making it possible for them to see higher return on investment when it comes to advertising on Meta's social media platforms.
New product launches
If you're an investor in Meta, the really exciting news involves new products that could lead to new revenue streams. For example, there's MusicGen, a new AI music tool that lets anyone create their own music based on text prompts fed into an AI interface. And there's a new AI voice tool called Voicebox that can emulate any voice in six different languages with uncanny accuracy.
And investors don't have to count on Meta alone to come up with new products. The company has embraced an open-source approach to AI, meaning that it is opening up its technology to outside developers for commercial use. This is a tremendous difference from other companies in the tech space that have preferred to keep their best technology highly proprietary. But as Meta sees it, the more developers working with its technology the better, because it helps build the company's overall AI ecosystem.
Can Meta Platforms pivot away from the metaverse?
Of course, any pivot away from the metaverse to AI is going to be difficult. There are sure to be plenty of skeptics along the way. After all, Meta Platforms essentially made a "bet the company" type of investment on the metaverse back in 2021, and now it looks like that turned out to be a huge, multibillion-dollar mistake. Are investors really going to trust Meta again after already getting burned once?
That's why it's exciting that Meta seems to be pushing the envelope on some of its new AI innovations. It may have initially ceded the early mover advantage to other tech titans such as Microsoft and Alphabet, but now it looks like Meta is mounting a credible AI strategy of its own. While Meta has been careful to point out that AI is not meant to replace the metaverse as a strategic focus, it's clear that the emergence of ChatGPT-style AI has unlocked the innovation inside the company.
Should you buy Meta Platforms?
In June, as part of its annual reconstitution of popular stock indices that are followed by the largest institutional investors, FTSE Russell announced that it would change Meta's status from "value" to "growth" stock. And a big reason for that has no doubt been Meta's successful embrace of AI as a pivot away from the metaverse. The narrative is shifting away from layoffs and cost reductions to growth and revenue streams.
There's a good reason the stock is up more than 130% year to date. Investors are starting to realize that Meta really is turning things around. If some of the new AI-focused products on the way from Meta are game changers, there could be plenty more big gains ahead.
