So much for the death of Big Tech.
Throughout 2022, it seemed like it might be the end of an era for Big Tech. Instead, a year later, it looks like it’s the start of the best chapter yet in Big Tech’s story.
And it is all thanks to one thing: artificial intelligence.
The likes of Meta (META), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOGL) were all hobbled by a slowing economy and runaway inflation in 2022. But they’ve come roaring back to life here in 2023.
And that was on full display last night in Meta’s second-quarter earnings report.
Throughout 2022, Meta looked like a sinking ship. Revenues were dropping. Profit margins were collapsing. Cash flows were evaporating.
In last night’s earnings report, though, Meta reported its biggest revenue growth rate since 2021, its first quarter of expanding profit margins in over two years, and free cash flow growth of over 100%.
Meta has flipped the script on its ugly 2022 growth trends in an emphatic fashion.
Now, in 2023, Meta is back to its normal dominant self.
What changed? AI.
Thanks to AI, Meta Is Making a Monster Comeback
Over the past 12 months, Meta has increasingly used AI to drive improved business results.
Improving Time Spent
Meta is using AI to get you to spend more time on its apps. The company is increasingly using AI-powered recommendation algorithms to populate content on your Facebook and Instagram Feeds. For the first time ever this past quarter, AI-recommend content constituted the bulk of content consumption on Facebook.
And guess what? Facebook users are liking it. Thanks to its AI-powered recommendation algorithms, time spent on Facebook – the “dinosaur” app that everyone expected to die – jumped a very impressive 7% last quarter.
Reheating Ad Revenues
Meta is also using AI to get advertisers to spend more on its platforms. The firm is increasingly integrating AI into its monetization tools to create a suite of automated ad products. These products – called Meta Advantage – are becoming very popular. Last night, CEO Mark Zuckerberg said that “almost all of our advertisers are using at least one of our AI-driven products.”
The result? A huge jump in ad revenues. Average revenue per user across Meta’s apps jumped 8% last quarter to its third-highest level ever. In fact, excluding holiday quarters (when ad spending is usually highest), it reached its highest-ever level. Total ad revenues rose 12%, marking their best growth rate since 2021.
Boosting Operational Efficiency
Lastly, Meta is using AI to improve its own operational efficiency. The company went through a ton of layoffs last year. And now it’s replacing a bulk of that lost labor with AI-powered automation tools. These are allowing Meta to “do more with less,” if you will. And that is enabling the company to reaccelerate revenue growth without adding marginal costs.
Again, the result is financially positive. Operating margins jumped to 29% last quarter, marking their first quarter of year-over-year expansion since early 2021. Profit margins are expected to keep improving for the foreseeable future.
Overall, over the past 12 months, Meta has increasingly deployed AI across its business to go from a dumpster fire to one of the most promising companies in the world.
The proof is in the pudding.
Without AI, Meta saw its stock drop 75% throughout 2021 and ‘22. And with it, Meta has seen its stock rally more than 150% in 2023.
That is the very real power of AI.
The Final Word on Red-Hot Meta Earnings
But AI isn’t just creating huge tailwinds for Big Tech stocks. It is creating huge tailwinds for any company – big or small – that is effectively using AI to drive improved business outcomes.
One such company is the very one that started this whole AI Boom – OpenAI, the creator of ChatGPT.
Already, since ChatGPT’s launch in November 2022, the company’s valuation has doubled!
But that’s just the start.
I truly believe OpenAI could be one of the world’s largest companies in the near future – if not the largest.
We think OpenAI represents the potential investment opportunity of a lifetime.
Too bad it is a startup that you can’t buy on a public exchange like META stock.
Though I did unearth an investment “loophole” that allows you to take a stake in OpenAI now – before its highly anticipated IPO.
This is your chance to invest in the next big thing. Like investing in Apple in the 1980s or Amazon in the 1990s, this is an opportunity you can’t afford to miss.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
