Meta generated a record $40.6 billion in total revenue during the recent third quarter of 2024 (ended Sept. 30). Most of that revenue comes from selling advertising slots to businesses, and the company has an incredible track record of launching new features and monetizing them in that way.

Meta originally placed ads in its content feeds to catch users’ attention while they were scrolling through posts from friends and family members. But video content formats like Stories and Reels became significant contributors to the company’s revenue, even though rival platforms like Snap‘s Snapchat and TikTok were first to market with similar features.

Meta AI already has over 500 million monthly active users, and while it’s free to use, the company says there will be opportunities to monetize it in the future. Personally, I think advertisers would pay money to link their websites or products within Meta AI’s responses when a user asks a relevant question.

But Meta AI also paves the way for new features like Business AI. Zuckerberg believes every business using Meta’s apps will eventually have its own AI-powered virtual agent, which can handle incoming inquiries from customers, and potentially even process sales. Businesses could customize their agent to suit their own needs by training it on their product inventory, or by teaching it to respond to customers in a way that fits their brand.

Meta will almost certainly charge money for a tool like Business AI, potentially on a per-message basis or even on a subscription basis, which would unlock entirely new revenue streams.

Meta stock soared 532% from its 2022 low point of around $90. However, based on its trailing 12-month earnings per share (EPS) of $21.23, it trades at a price-to-earnings (P/E) ratio of just 27.2, which is still cheap.

It’s a 15% discount to the Nasdaq 100, which trades at a P/E ratio of 32.2. It also makes Meta cheaper than every other AI stock with a valuation of $1 trillion or more, except for Alphabet, which is currently fighting several regulatory battles against the U.S. government:

Meta stock looks even cheaper on a forward basis. Wall Street’s consensus estimate (according to Yahoo!) suggests the company will generate $25.33 in EPS during 2025, placing its stock at a forward P/E ratio of 22.7. In other words, Meta stock will have to soar by 42% next year just to trade in line with the P/E ratio of the Nasdaq 100.

Llama will be the key to Meta’s success in the AI race from here, because as mentioned, quality AI software starts with a quality LLM — but developing LLMs is not cheap. It took around 16,000 of Nvidia’s H100 graphics processors (GPUs) to train Llama 3, but Llama 4 is going to need over 100,000.

That’s why Meta is on track to spend up to $40 billion on AI infrastructure in 2024, and it plans to spend even more in 2025. In fact, Morgan Stanley thinks the company could spend a whopping $52 billion next year.

If Wood is right, Meta could eventually reap hundreds of billions of dollars in revenue from that AI spending, which will translate into spectacular returns for investors. Given its attractive valuation, Meta stock might be the best pick out of the AI giants to buy next year.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Cathie Wood Says Software Is the Next Big AI Opportunity — 1 Super Stock You’ll Regret Not Buying in 2025 If She’s Right was originally published by The Motley Fool