Amid the wild swings on Wall Street this year, it may come as a surprise to some investors that the S&P 500 index is up 1% in 2025, as of this writing. The stock market has overcome economic and U.S. trade policy concerns, fueled by a solid first-quarter earnings season.
Shares of Meta Platforms (META 1.04%) have outperformed, with a 14% gain year to date, amid market optimism regarding the company's ability to capitalize on the artificial intelligence (AI) revolution. In many ways, the long-term outlook for the social media and technology giant is as strong as ever.
Here are four reasons why Meta Platforms may be the best AI stock of the "Magnificent Seven" right now.
Image source: Getty Images.
1. Meta's demonstrating AI leadership
Meta Platforms distinguishes itself through pioneering innovation in social media, with over 3.4 billion monthly active users across its ecosystem, including Facebook, Instagram, and WhatsApp. These platforms are central to users' online identities and modern digital communication.
By leveraging this vast user base, Meta harnesses unparalleled data from user interactions, providing a key edge in its AI development, including the Llama 4 large language model (LLM).
Unlike hyperscalers like Microsoft and Amazon, whose AI strategies depend on selling cloud-based AI services to external clients, Meta's strength lies in directly applying its AI models to enhance its core advertising business. This approach boosts conversion rates through precision targeting while increasing user engagement with sophisticated content algorithms. This self-sustaining model enables Meta to refine and deploy AI innovations internally, unaffected by shifting AI data center demand.
Additionally, Meta's investments pave the way for transformative advancements in the metaverse and augmented reality. This strategic focus promises to create new revenue streams, underscoring Meta's bright outlook for driving future growth in the evolving digital landscape.
2. Meta is an earnings powerhouse
Meta's AI strategy is paying off, with signs that its operating and financial momentum is just getting started. In the first quarter of 2025, revenue rose 16% year over year, while net income soared 35% to a record $16.6 billion, or $6.43 in earnings per share (EPS) based on the AI-powered monetization. Despite higher AI investment, Meta generated $10.3 billion in free cash flow during the quarter, supporting long-term goals.
Wall Street analysts anticipate Meta's robust performance to continue, forecasting 14% revenue growth for 2025 and 2026, with average annual EPS growth of nearly 10% over the period. Meta's ability to adjust its capital expenditures (capex) within the 2025 guidance range of $64 billion to $72 billion, depending on market conditions, ensures sustained earnings and cash-flow strength.
3. Meta's business is showing resilience against tariffs
Meta's strong earnings outlook underscores its operational resilience, which is particularly vital amid ongoing concerns about new U.S. tariffs targeting imported goods. Proposed tariffs are disruptive for technology titans like Amazon, Apple, and Nvidia, which rely on global supply chains.
In contrast, Meta's digital-first business model is relatively insulated from these tariff-related risks, allowing the company to maintain stability and capitalize on AI-driven growth regardless of trade policy shifts. This resilience positions Meta as a stable investment in an environment where tariff-related volatility remains a concern.
4. Meta's got a compelling valuation
Meta Platforms stands out as a top AI stock because of its attractive valuation. With a forward price-to-earnings (P/E) ratio of 25, Meta trades at a large discount to its Magnificent Seven peers, including Apple, Amazon, Microsoft, and Nvidia, which average an earnings multiple closer to 32.
While internet giant Alphabet is the exception, trading at a forward P/E of 18, it faces significant regulatory scrutiny that introduces unique risks. Alphabet's dominant position in online search through Google has drawn intense scrutiny from global regulators amid ongoing antitrust investigations, a challenge Meta has largely avoided.
Given Meta's increasingly high-tech profile, double-digit earnings growth, and fundamental advantages, I believe the stock remains undervalued with significant price-appreciation potential.
Data by YCharts.
The bottom line
Meta Platforms stock is a great option for investors seeking to build a diversified portfolio with exposure to high-level themes in technology and AI, two of the most important forces shaping the global economy. In my view, Meta is not just the best AI stock among the Magnificent Seven, but one of the top investment opportunities marketwide, and it's well-positioned to continue rewarding shareholders.
