The Meta Platforms AI expansion is generating buzz in the tech world. Meta Platforms (NASDAQ:META) recently announced a slew of AI-driven updates and hardware at its Connect event, including a new Quest 3S headset, Orion Augmented Reality (AR) glasses, and AI-enhanced Ray-Ban glasses. But what does this mean for Meta’s future, and should investors consider buying in now?

Quest 3S: A Competitive AR/VR Offering

At the Connect event, Meta Platforms launched the Quest 3S, a more affordable version of the popular Quest 3 mixed reality headset. Priced at $299.99, it retains many features of its predecessor but at a more budget-friendly cost. Additionally, Meta reduced the price of the 512 GB Quest 3, strengthening its competitive positioning against Apple’s (NASDAQ:AAPL) Vision Pro AR device.

Orion AR glasses also took center stage with their expansive field of view. Although not yet available for public purchase, these glasses aim to leverage Meta AI’s capabilities, understanding the physical environment and assisting users with visual data. For now, they serve as developmental tools, but they hint at the future potential of Meta’s AR ecosystem.

Ray-Ban Meta Glasses and AI Enhancements

Meta’s collaboration with Ray-Ban resulted in smart glasses gaining enhanced AI features. Powered by Meta AI, these glasses enable voice interactions, video capabilities, and even translations of foreign languages like Spanish, French, and Italian through open-ear speakers. Users can set voice reminders and use visual recognition features to remember everyday items, such as parking spots.

The partnerships Meta has formed with Spotify (NYSE:SPOT), Amazon Music, Audible, and iHeartRadio add value to Ray-Ban’s smart glasses, providing a more immersive and integrated audio experience.

Meta AI Gets a Voice and Image Update

One of the biggest updates in the Meta Platforms AI expansion is the enhancement of Meta AI’s capabilities. Now, users can communicate with Meta AI using their voices on platforms like Messenger, Facebook, WhatsApp, and Instagram Direct Message. These interactions are enhanced by voice options from well-known personalities like Awkwafina, Dame Judi Dench, John Cena, Keegan Michael Key, and Kristen Bell.

Furthermore, Meta AI can now analyze and answer questions about photos shared in chats, expanding the range of interactions and utility for users. Meta AI’s new “Imagine” features are set to be integrated across Facebook, Instagram, and Messenger, further boosting user experience and engagement.

Data Advantage and AI Monetization

Meta Platforms has an extensive data trove thanks to its vast daily user base of over 3.2 billion. This immense data resource gives Meta a significant advantage in deploying and improving AI across its various platforms, including WhatsApp, Facebook, Messenger, and Instagram. In Q2 2024, ad impressions rose by 10% year-over-year, highlighting Meta’s growing reach and impact in the digital ad sales market, where it competes directly with Alphabet (NASDAQ:GOOGL).

Efforts to incorporate AI tools into WhatsApp are aimed at making businesses more consumer-friendly, enabling customer interaction and facilitating e-commerce activities. Meta’s AI tools for ad creation are already widely used, with over a million advertisers creating 15 million ads using these tools just last month.

Is META Stock a Buy After 61% YTD Growth?

Meta Platforms stock has shown significant growth in 2024, with a 60.6% year-to-date (YTD) return, outperforming the Zacks Computer & Technology sector (up 23.4%) and the Zacks Internet Software industry (up 21.1%).

As part of its AI ambitions, Meta expects to invest between $37 billion and $40 billion in AI infrastructure by 2024. With a solid cash balance of $58.08 billion as of June 30, 2024, these investments aim to keep Meta at the forefront of AI development. The company is currently working on Llama 4, its next-generation AI model, underscoring its focus on becoming a leader in AI services.

While the AI infrastructure development is promising, monetizing these services will take time, and growing regulatory headwinds are a concern for investors.

Consensus Estimates and Valuation

The Consensus Estimate for Meta’s 2024 earnings per share (EPS) stands at $21.36, marking a 43.64% year-over-year increase. For Q3 2024, earnings are pegged at $5.15 per share, reflecting a 17.31% rise from the prior year.

However, the stock’s valuation remains on the high side. The forward 12-month Price/Sales ratio of 8.07X exceeds the median of 7.22X and is also higher than the Computer & Technology sector’s ratio of 6.32X.

The Bottom Line on Meta Platforms AI Expansion

The Meta Platforms AI expansion signals an aggressive push into AI and AR technologies. While Meta’s recent product launches and partnerships position it well for future growth, the stock’s valuation and the timeline for monetizing its AI initiatives are factors to consider. Given its strong financial position and ongoing AI developments, Meta remains a compelling option for investors seeking exposure to the tech sector. However, with regulatory hurdles and a stretched valuation, a cautious approach may be warranted.

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