Meet 1 Top AI Stock That Has Soared 675% Since 2022

Artificial intelligence (AI) continues to garner lots of attention. And for good reason. It seems that not a week goes by without a major news story about it grabbing eyeballs.

The takeaway for investors is that this revolutionary technology is here to stay. Corporate executives believe this to be true, and they continue to pour billions upon billions of dollars into it. At the end of the day, it might be a good idea to figure out how to gain exposure to this trend.

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You don't have to look that far to find what could be a worthwhile opportunity. Meet one top AI stock that has soared 675% since early November 2022.

Fundamental strength

It wasn't long ago that Meta Platforms (NASDAQ: META) was faced with fading investor excitement. In 2022, macro headwinds led to slower revenue growth. And profitability was under pressure due to rising costs.

But the digital advertising powerhouse came roaring back, reporting strong financial results over the past couple of years thanks to a resilient economy and a renewed focus on financial discipline.

Revenue was up 15.7% in 2023 and 21.9% in 2024. And in the recently ended fourth quarter, Meta posted a stellar 48% operating margin, up from 20% just two years ago. This type of fundamental strength is precisely what has driven Meta shares higher in recent times.

AI ambitions

Like most of its peers in big tech, Meta is investing aggressively in AI, with $39 billion in capital expenditures (capex) in 2024.

On the fourth-quarter earnings call, chief financial officer Susan Li said: "We expect our full year 2025 capital expenses will be in the range of $60 billion to $65 billion. We expect capex growth in 2025 will be driven by increased investment to support both our generative AI efforts and our core business." This is a massive sum of money that will go toward building out technological infrastructure.

Meta has already launched AI features for its social media users, helping them find information, edit photos, and write more creatively. And it's making a hardware push, selling 1 million pairs of Ray-Ban smart glasses last year.

There are also tools built solely for advertisers to create more efficient marketing campaigns. The company says more than 4 million ad customers are already using generative AI features.

The AI playbook is simple. It hopes this technology not only promotes user growth, but that it can also boost engagement.

And for advertisers, it's all about increasing their return on investment when running campaigns so that more ad dollars are spent with Meta.

Position of power

Most businesses can't even dream about spending this kind of money on AI. Meta is in this advantageous position because of its financial situation.

As of Dec. 31, it had $77.8 billion of cash, cash equivalents, marketable securities on its balance sheet, significantly more than its total long-term debt of $28.8 billion. Plus, Meta generated $52.6 billion of annualized free cash flow in the fourth quarter. There is almost no financial risk for this company.

It also helps that Meta has a gargantuan base of 3.35 billion daily active users across its family of apps, up 5% year over year in the fourth quarter. And it helps create powerful network effects that support the company's incredible competitive position.

Is Meta worth the price?

As of this writing, Meta shares trade at a price-to-earnings ratio of 29.8. This is a premium to the trailing-five-year average, which isn't a surprise considering the stock's monumental rise since 2022.

To be clear, the valuation isn't a bargain by any means. However, it's still not a terrible entry point for new investors. Diluted earnings per share rose at a compound yearly rate of 20.1% over the past three years. That track record justifies paying the current price to own one of the best businesses on the planet.

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*Stock Advisor returns as of February 3, 2025

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.