Why I Just Bought This Magnificent AI Stock Hand Over Fist
Key Points
Hefty AI spending and a recent lawsuit loss have been weighing on Meta Platforms' shares.
Ironically, AI spending is good for Meta, and the lawsuit loss may actually benefit the company.
It's difficult to pass on a world-class company like Meta at these share price levels.
Shares of Meta Platforms (NASDAQ: META) have fallen 30% from their high. Such declines are rare for the social media giant, occurring only a handful of times in the past 10 years. I must confess, I bought the dip hand over fist.
The stock's tumble probably doesn't boil down to one thing; many Magnificent Seven stocks have stumbled from their highs. Investors may be concerned about the company's aggressive spending on artificial intelligence (AI). If that weren't enough, Meta just lost a court battle that could open the door for hefty damages in future litigation.
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Here's why I hit the buy button on Meta stock, despite all of that.
Image source: The Motley Fool.
Meta is an obvious AI winner
While many cloud companies are spending like crazy on AI to build new businesses, Meta is spending on AI to strengthen its own. OK, I'll exclude Reality Labs for a moment, which has been a genuine cash inferno.
AI is a positive tailwind for several aspects of digital advertising, Meta's bread and butter. AI is automating ad creation and improving pricing by matching ads to their ideal target audiences. As a result, Meta's operating cash flow has surged since 2022, which CEO Mark Zuckerberg is pumping right back into the company for AI.
Plenty of room for future monetization
Meta still has an embarrassment of riches in terms of future monetization opportunities. There is additional e-commerce potential in Facebook and Instagram. Meanwhile, Meta has barely started leaning into advertisements on WhatsApp and Threads.
The company's daily active app users reached 3.58 billion in December 2025, up 7% year over year. It's remarkable that Meta's audience continues to grow, as it has from such a large base, and it represents a vast distribution network for any product or service Meta launches.
Should investors fear Meta's recent courtroom defeat?
Just recently, a jury ruled against Meta Platforms in a lawsuit over social media safety for young users. It's a potential landmark moment because it could set a precedent holding social media companies liable for how young people use their platforms, opening the door to additional litigation and future damages.
While this could cause financial harm to Meta, it may actually strengthen the company's long-term competitive positioning. Much as tobacco litigation did decades ago, the litigation could ultimately stifle new competition by making it riskier and more difficult to build new social media apps.
Putting it all together
Right now, Meta stock is trading at around $560 per share, less than 19 times its 2026 earnings estimates. That's a compelling value for one of the world's most powerful companies, especially given analyst estimates of 22% annualized long-term earnings growth.
Meta Platforms seems like a lock as one of AI's biggest long-term winners. Despite the recent drama and falling stock price, this will likely be a tremendous buying opportunity in hindsight.
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Justin Pope has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
