The Market Is Giving Investors an Unbeatable Opportunity to Buy This Long-Term Artificial Intelligence (AI) Winner (Hint: Not Palantir or Nvidia)

Three years since the launch of ChatGPT, it's safe to say generative artificial intelligence is more than just a passing fad. The innovations of the past few years have the potential to affect a wide range of businesses, and a handful of companies have been at the forefront of the efforts.

Nvidia (NASDAQ: NVDA) and Palantir Technologies (NASDAQ: PLTR) are two of the biggest beneficiaries of investor optimism around AI. One makes the essential infrastructure for building better large language models while the other provides the software backbone that enables all sorts of businesses to harness the power of those models.

Both companies have seen their stocks soar over the past three years on the back of strong financial results. More recently, though, they've both seen pullbacks in their stock prices, and investors may be thinking whether now is the opportunity they've been waiting for to invest in the tech giants.

But a pullback in another stock could be even more appealing for long-term investors who expect artificial intelligence to play a pivotal role in the future. Here's why readers should take a closer look at Meta Platforms (NASDAQ: META) as an incredible opportunity to capitalize on the advances of artificial intelligence.

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Why the market is giving investors a great deal

Shares of Meta declined sharply after the company reported its third-quarter earnings. The company continues to produce strong operating results, though. Revenue climbed 26% year over year last quarter, and earnings per share (adjusted for a one-time non-cash tax expense) came in well above expectations, growing 20% year over year.

The thing that has investors pulling away from the stock is Meta's plans for AI spending. The company saw a big step-up in spending this year, and that's already reflected in its income statement. The operating margin compressed 3 percentage points last quarter, although it's still a healthy 40%. Management said it's planning to spend even more on AI data centers in 2026.

It's essential to note that data center spending requires a significant up-front investment, but those expenses are recognized over time as the assets depreciate, ultimately affecting the income statement. Meta's management estimates the useful lives of the servers in its data centers to be five-and-a-half years, so it amortizes the expense over that period on its income statement.

As spending continues to increase year after year, operating costs will also continue to rise. And if Meta's estimate of useful lives is too favorable, it could end up taking a big hit on its income statement at some point down the line as it accelerates the depreciation expense.

Another point of concern for investors recently is the use of off-balance-sheet financing using special purposive vehicles. Meta used a joint venture to raise debt to finance its $27 billion data center planned for Louisiana. That debt won't show up on Meta's balance sheet, but it's a notable position for the company and should be factored into its valuation.

Perhaps after Meta spent heavily to build out Reality Labs without much to show for it, investors are wary of the tens of billions that Meta plans to spend on AI every year. But the tech giant is well-positioned to benefit from further advances in generative AI, and it's already showing excellent financial results.

One of the biggest beneficiaries of generative AI

Meta could ultimately benefit more from more capable generative AI than any company in the world. It could provide a significant boost to its already massive advertising business.

Meta has historically grown its advertising business in cycles. It creates a product, builds engagement, and then turns on the ad faucet. As it ramps up advertising on a certain surface (like Feeds, Stories, or Reels), it usually sees a decline in the average price per ad as supply increases. As marketers learn to optimize new ad formats, they experience improved returns on investment, and the average price per ad increases until the market reaches equilibrium again.

Meta recently started showing ads in Threads and WhatsApp in addition to producing improved engagement on Instagram and Facebook. The result was a 14% increase in ad impressions last quarter. But the average price per ad also increased, up 10% year over year.

Meta's artificial intelligence capabilities are a key reason why. Meta's AI is getting better at targeting advertisements to users. On top of that, it's helping marketers iterate on their ad campaigns to make advertisements more effective and appeal to more users. As a result, users are seeing increasingly relevant ads.

But that's just the tip of the iceberg. Meta is developing an AI agent that can create and manage ad campaigns for a business. That can put small businesses, which make up the majority of Facebook and Instagram advertisers, on a level playing field with big corporations that have dedicated ad teams. As a result, Meta could expand the budgets for many of its advertisers and bring in new marketers to its platform.

Lastly, generative AI could also expand the output of content creators, producing tons of content for Facebook and Instagram. As a result, engagement on the two social media apps could continue climbing as users find a growing catalog of tailor-made content. That should increase ad inventory, providing more space for the influx of advertisers from AI-assisted campaigns to see strong returns on their ad spend.

But getting to that point will cost money. At Meta's scale, licensing another developer's AI models doesn't make sense. It has to build it. That means lots of data centers and high research and development costs.

Why it's a great opportunity right now

After the pullback in share price, Meta stock trades for less than 22 times analysts' expectations for 2026 earnings. That's an incredible price for a stock that's growing its bottom line at a 20% rate, fueled by strong revenue growth. The price is far more attractive than the ultra-expensive Palantir, which trades for well over 200 times earnings. It's also more attractive than Nvidia, which has high growth expectations but faces growing challenges and risks.

While Meta's bottom-line growth might slow temporarily as more AI expenses show up on the income statement, the top line should continue to climb at a steady pace thanks to the improvements it's making in the ad business. As AI spending levels off, it should demonstrate operating leverage once again, with an expanding operating margin, indicating a long runway for earnings growth.

The stock isn't without risks, but at the current price, the downside is a lot smaller than the upside.

Adam Levy has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.