Could This Be the Most Misunderstood Artificial Intelligence (AI) Stock on the Market?

When investors think of potential artificial intelligence (AI) winners, they may think of those powering the revolution through tools such as chips or those offering such products and services to others through a cloud platform. Names like chip leader Nvidia and cloud giant Amazon come to mind.

But another company is also becoming a powerhouse in the world of AI, though most investors wouldn't immediately call it an AI company. Instead, they would likely think of its main revenue driver and call it a social media business. Could this player be the most misunderstood AI stock on the market? Let's zoom in and clear up any confusion.

Image source: Getty Images.

A social media giant

The company I'm talking about is Meta Platforms (NASDAQ: META), owner of some of the world's most popular social media platforms, from Facebook to Instagram. Meta has built a long track record of success thanks to this business. The company generates billions of dollars in revenue as advertisers place ads for their products and services across these apps -- it's a place where they know they'll find us, particularly since 3.5 billion people use at least one of Meta's apps every day.

In recent years, though, Meta has broadened its focus to include another area, and that's AI. The company doesn't sell chips to others like Nvidia and isn't a cloud provider like Amazon. But Meta has developed chips for its own use and has built out data centers for its own AI workloads. And it's even created a large language model, Llama, that it's made available to others. The company has been increasing its spending on AI in recent years, making it a point of focus.

Meta has forecast 2025 full-year capital spending in the range of $70 billion to $72 billion, up from earlier estimates, and said AI buildout should put "upward pressure" on capex in 2026.

Keeping users on the apps

One question investors may have is: What will this focus bring to Meta? Meta's efforts are adding more features as well as a virtual assistant to its apps, and the idea is that this will keep us on these apps for longer periods of time -- or prompt us to use the apps more frequently.

In either case, if we spend more time on Meta's apps, advertisers may spend more, driving the company's revenue higher. But this isn't all. Meta is also aiming to revolutionize advertising through its AI work, quickly and easily creating winning ads for its advertising customers. This, too, should boost ad spending across Meta.

Finally, Meta's AI research may result in other innovations down the road that may expand its revenue sources.

Today, some might misunderstand Meta and wonder why the company is investing so heavily in AI. But those who see these potential benefits and buy Meta shares may, along with Meta, score a win over the long run.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.