Both focusing on AI, Meta outshines the top five tech stocks this year, what did Zuckerberg do right?
Meta has performed outstandingly in the technology sector this year, with its stock price rising by approximately 51.2%, second only to NVIDIA. Mark Zuckerberg successfully conveyed the company's vision of AI integration to investors, believing that AI is enhancing the performance of core business digital advertising and helping them surpass competitors such as Google, Microsoft, and Amazon. Meta's second-quarter financial report showed that both revenue and advertising income exceeded expectations, demonstrating significant investment returns and further strengthening investor confidence
Although all are striving in the field of artificial intelligence (AI) and trying to seize this trend, Meta's stock performance this year has been outstanding. Among the seven tech giants in the US stock market, it is only second to the hot AI concept stock NVIDIA, far ahead of Google, Microsoft, and Apple.
As of the close of this Wednesday, Meta's stock price has risen by about 51.2% since the beginning of the year. Although it is not as high as the nearly 159.5% increase of NVIDIA during the same period, it has left the other five major tech stocks far behind. Alphabet, the parent company of Google, has risen by 20% this year, Amazon by over 18.5%, Apple by about 17.6%, Microsoft by about 12.8%, and Tesla has fallen by about 10.2%.
Before turning lower in Thursday's trading session, Meta rose to $544.23 in early trading, hitting an intraday historical high, with a daily increase of 1.7%. Even if it closes lower by midday on Thursday, Meta is expected to maintain a cumulative increase of over 50% for the year, and is still expected to rise by over 10% this month.
Why is Meta so favored by investors? What did Meta CEO Mark Zuckerberg do right? Some commentators believe that what sets Meta apart from other giants is that Zuckerberg has better convinced investors to believe that AI is helping to improve the company's core business - digital advertising performance. The driving force of AI on other companies such as Microsoft, Google, and Amazon has not been well articulated.
Wall Street News has mentioned that the stock performance in the second quarter earnings season shows that investors are increasingly eager to see substantial returns from massive AI infrastructure investments. The financial reports of Google, Microsoft, and Amazon have failed to meet their expectations. Meta, on the other hand, has become a "clear stream" in this regard.
When announcing the second-quarter results, Meta unexpectedly raised the lower end of the full-year capital expenditure range due to AI investments. However, both total revenue and core business advertising revenue grew by over 20% above expectations in the second quarter, and the midpoint of the third-quarter revenue guidance also exceeded expectations. Zuckerberg believes that the company's spending on AI has driven improvements in ad targeting and content recommendations. The massive investment in AI by Meta is a short-term sacrifice for long-term benefits.
Zuckerberg emphasized the empowerment of advertising business by AI during the earnings call, stating that AI investments will significantly boost the company's advertising business. AI-optimized ad placements not only improve ad effectiveness, but also enhance engagement and improve user experience through improved content recommendation engines. Although the returns on Meta's investments in AI infrastructure may not be immediate, Zuckerberg believes that early preparation is crucial. "It is more important to prepare in advance than to risk falling behind in infrastructure development," he said.
Gene Munster, Managing Partner of Deepwater Asset Management, commented on Meta's second-quarter earnings call, calling it Zuckerberg's "best earnings call as a public CEO.""He (at the meeting) explained the short-term benefits, long-term benefits of AI, and when all this will come into play. And he did it in a convincing way."
Andrew Ye, investment strategist at Global X ETFs, commented: "Meta has been investing heavily in generative AI and will continue to do so, but it can be said that it articulates the vision of integrating AI into the company more clearly than its competitors."
Compared to the two giants who are also investing heavily in AI - Microsoft, whose Azure cloud business growth slowed in the second quarter, and Google, whose second-quarter capital expenditures exceeded expectations, analysts were not so impressed with their conference calls. Alec Young, Chief Investment Strategist at Mapsignals, said: "Google's (conference call) was like, 'Well, we have to spend money to keep up with everyone,' but this hasn't worked out very well. Microsoft is slightly better at selling (the AI concept). They are actually doing the same thing."