Meta stock META gained over 5.2% on Monday after JP Morgan added the stock to its Analyst Focus list.
Meta replaced Alphabet on the list.
The bank has shown increasing confidence in the company’s advertising business and its ability to use artificial intelligence to improve ad performance.
JP Morgan analyst Dough Anmuth said Meta’s relative advertising strength was becoming more evident.
This made the stock and Amazon the bank’s preferred picks in the internet sector.
The upgrade comes at a time when Meta’s latest results showed strong revenue growth, supported by its ad business.
Investors are also assessing the outlook for big tech’s AI spending after recent US election results.
JP Morgan favours Meta’s advertising growth powered by AI
JPMorgan added Meta to the list after the company’s strong ad performance in its Q3 results.
The company reported $64.6 billion in revenue in the quarter, increasing 26% from the previous year.
The advertising revenue also grew 26%, with North American advertising revenue increasing by 33%.
The adjusted EPS came in at $7.40, beating the market’s expectations.
The bank pointed out the company’s AI-driven improvements in advertising as a main idea of its investment thesis.
JPMorgan also highlighted the potential of Meta Muse’s expansion and monetisation.
It also added that there are enterprise opportunities for Meta Model API and Muse Code.
The focus on advertising comes as Meta seeks to strengthen its position in AI-powered products and services.
Big Tech spending to peak in 2027
Yorkville Ives analyst Dan Ives said that he expects big tech spending to peak in 2027 rather than in 2028 or 2029.
The analyst also expects the free cash flow to recover after reaching its lowest point in the first half of 2027.
The revised timeline gives investors hope that the heavy capital expenditure for AI buildout will ease by next year, and the company will return to cash flow positive sooner than expected.
Meta became cash-flow negative in its latest results.
Data-centre delays put focus on AI efficiency
Morgan Stanley analysts said major AI hyperscalers, including Meta, Alphabet, Amazon, Microsoft and SpaceX, were well positioned to adapt to changes in the data-centre construction environment following the US midterm elections.
The analysts maintained their capital expenditure forecasts, arguing that large technology companies could work with state governments or adjust projects to more favourable locations.
They also said requirements introduced by newly elected governors in states such as Texas and Ohio were broadly achievable for leading data-centre developers.
However, a slower pace of infrastructure development could increase the importance of improving the existing computing capacity efficiency.
Morgan Stanley said it was closely watching for greater compute efficiency from leading AI developers in 2027, allowing products to scale with fewer resources.
The analysts also pointed to comments from Meta and Alphabet on this objective.
A delay in data-centre construction could place greater emphasis on improvements in large language model efficiency, potentially benefiting companies with the resources and willingness to invest in their own AI models.
AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.
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