On December 18, 2023, BofA Securities reaffirmed its “Buy” rating for Meta Platforms, Inc. (NASDAQ: META), setting a price target of $810.00. This decision comes as the firm assesses the current landscape of artificial intelligence (AI) spending and its potential impact on the tech giant’s performance.
Market Performance and Investor Sentiment
Despite a challenging market environment, Meta has lagged behind both the broader market and significant competitors. Year-to-date in 2025, Meta’s stock has risen by only 11%, compared to an 18% increase in the NASDAQ and a striking 56% surge for Alphabet. Analysts have also lifted Meta’s earnings estimates for 2026 by 16% since the beginning of 2025. Nonetheless, investor caution has grown, driven by fears surrounding AI expenditure and increasing operating costs.
BofA noted that the price-to-earnings (P/E) multiple for 2026 contracted in the second half of 2025, reflecting deteriorating sentiment regarding AI investments and rising operational expenses. Despite these concerns, the firm remains optimistic about potential near-term catalysts, including Meta’s guidance on expenses for 2026 and the planned launch of large language models (LLMs) in the first half of 2026.
Looking Ahead: AI Investments and Strategic Focus
As the market scrutinizes AI spending, investors will be particularly attentive to the returns generated from these investments across Meta’s core applications, advertising monetization, and new business ventures. BofA emphasized that management’s insights on the costs associated with developing LLMs compared to licensing models could positively influence market sentiment.
“Given Meta’s significant investment in LLM development without a licensing revenue model, we think management commentary on LLM build cost vs. licensing, and the long-term benefits of an in-house LLM could be helpful for sentiment,” the firm stated.
Meta continues to enhance its advertising capabilities while heavily investing in AI and the metaverse. Although there are risks associated with investing in META, BofA’s stance reflects a belief that the company possesses the potential for substantial returns in the AI sector. The firm urges investors to consider other AI stocks with potentially higher returns within a shorter time frame, further diversifying their portfolios.
As the landscape of AI investment evolves, Meta’s focus on innovation and strategic spending will be critical in determining its future performance and market position.
