Meta stock surpasses Amazon as a 2024 generative AI investment.

Given recent criticisms of Meta’s involvement in societal issues, investors should anticipate Meta Platforms outpacing Amazon in capturing the majority of Generative AI’s profit potential. This expectation is supported by several factors:

Meta is poised for faster growth compared to Amazon.
Meta’s core business demonstrates greater potential for expansion and profitability compared to Amazon’s.
Meta’s swift transition towards Generative AI suggests potential for earlier returns compared to Amazon’s efforts.

Meta’s stock performance in 2023 and 2024 has exceeded that of Amazon, with both companies outperforming the Nasdaq and the Generative AI Stock Index as outlined in Brain Rush’s upcoming book.

Both company leaders expressed optimism about their prospects. “Our community and business have seen growth, resulting in a positive quarter,” remarked Meta CEO Mark Zuckerberg in a press statement. “Significant strides have been made towards realizing our vision of advancing AI and the metaverse.”

“In a statement, Amazon CEO Andy Jassy expressed that the fourth quarter marked a record-breaking holiday shopping season and concluded a strong 2023 for the company. Looking ahead to 2024, Jassy noted that Amazon’s teams are maintaining a rapid pace of delivery and expressed enthusiasm for the opportunities ahead.”

In their fourth quarter 2023 financial updates, both corporations surpassed projections and revised their guidance upwards. Meta, boasting a 29% net margin for 2023, demonstrated faster growth, provided more optimistic guidance, and introduced a dividend of 50 cents per share. Conversely, Amazon, which achieved a 17% net margin the previous year, is experiencing slower growth but is making strides in Generative AI.

Meta reduced its workforce by 22%, concluding 2023 with 67,317 employees, as reported by IBD. Amazon downsized approximately 27,000 employees the previous year, concluding 2023 slightly below the level of 1.53 million from the previous year, as stated by the Wall Street Journal.

Despite a prolonged financial setback from its investment in the metaverse, Meta deserves acknowledgment for its significant strides in Generative AI. Concurrently, Amazon’s lucrative AWS stands to gain directly from Generative AI, prompting the tech giant to pursue various endeavors aimed at maximizing the value derived from AI chatbots.

Meta’s Reality Labs division, with a focus on the metaverse, experienced a significant 47% increase in revenue, exceeding $1 billion in quarterly revenue, primarily attributed to sales of the new Quest 3 headset device, as reported by Meta CFO Susan Li. However, the division incurred a loss of $4.6 billion, contributing to the overall substantial losses from Meta’s metaverse ventures, according to the Journal.

In 2024, Meta plans to allocate the largest portion of its capital budget to AI investments. Expected capital expenditures for 2024 are projected to fall within the range of $30 billion to $37 billion, driven by investments in both AI and non-AI servers and data centers, including the construction of new data centers, as per CNN’s report.

The company is set to allocate billions of dollars towards Nvidia’s AI chips for the training of Meta’s AI models. Mark Zuckerberg expressed a strong commitment to competitiveness in this field, emphasizing ongoing aggressive investments to develop cutting-edge clusters. Meta is also focused on pioneering novel data center designs and crafting custom silicon tailored specifically for their computational needs, as reported by CNBC.

Meta’s strategic plans encompass extensive AI research endeavors and the integration of AI technology across its product spectrum. Zuckerberg highlighted the importance of understanding evolving AI capacity requirements for forthcoming foundational research and product innovation, as outlined in a report by CNN.

Furthermore, Meta intends to make substantial investments in AI-powered advertising tools, which proved instrumental in mitigating the impact of Apple’s alterations to its App Store privacy policies in 2021. Additionally, the company is gearing up to delve into artificial general intelligence initiatives in 2024, as detailed by CNN.

Despite initially trailing behind competitors like Microsoft and Google in AI investments, Amazon has reported a significant acceleration in AI revenues, according to Yahoo! Finance. Amazon’s CEO, Jassy, highlighted that every consumer-focused sector within the company is actively working on multiple generative AI applications.

Despite this initial lag, AWS remains a dominant force, controlling 30% of the cloud market. In the fourth quarter of 2024, AWS experienced a 13% revenue growth and a 38% increase in operating income, as reported by the Journal. With the increasing deployment of AI in various operations, AWS stands to gain “tens of billions of dollars” in additional revenue. This growth trajectory is supported by the fact that many companies rely on cloud services for training and utilizing large language models. Amazon has also indicated an expected rise in capital expenditures for 2024, mainly attributed to the expansion of its AI operations, as highlighted by Yahoo! Finance.

In September 2023, the corporation unveiled its Amazon Bedrock AI services, enabling users to employ models from Anthropic, a company in which Amazon invested $4 billion, along with Stability AI and Amazon, to develop generative AI applications.

Moreover, on February 1, Amazon introduced Rufus, a fresh shopping aide educated on Amazon’s product database, capable of responding to customer inquiries and suggesting items within the Amazon mobile application, as per Yahoo! Finance.

Despite Meta outperforming Amazon in terms of stock price performance, analysts are currently more bullish on Amazon stock for the upcoming year. According to CNN Business, a median price target of $410 per share, indicating a 4% upside, has been set by 62 analysts covering Meta. Conversely, Amazon stock is projected to have a 16.2% upside, with a median price target of $185 from 59 analysts.

However, I hold a different perspective from these analysts and anticipate Meta’s stock to experience significantly higher growth in 2024. This expectation is based on Meta’s faster growth trajectory, its superior ability to deploy Generative AI, and its less asset-intensive business model.