Meta Platforms META is strengthening its AI footprint through its latest expanded partnership with Broadcom AVGO. As per the deal, META and Broadcom will co-develop multiple generations of its custom AI chips (MTIA), which power AI across the former’s platforms. The collaboration will cover chip design, packaging, and networking to support large-scale AI workloads like recommendations and generative AI. AVGO will provide its XPU platform and advanced networking technologies to help Meta Platforms build a high-performance AI infrastructure. The partnership includes an initial deployment exceeding 1 gigawatt of computing capacity, with plans to scale to multiple gigawatts over time.
So, does META’s AI expansion strategy make the stock attractive for investors? Let’s find out.
META’s AI Integration Boosts User & Advertiser Engagements
META’s focus on integrating AI into its platforms — Facebook, WhatsApp, Instagram, Messenger and Threads — is driving user as well as advertising engagements. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.58 billion daily users, including 2 billion daily actives each on Facebook and WhatsApp. Time spent across platforms is expected to benefit from Meta Platforms’ continuous ranking optimizations.
AI recommendations that deliver higher quality and more relevant content are expected to drive engagement. The company expects to advance the capabilities of META’s underlying media generation models and ship new features to further enhance the product experience in 2026. Focus on expanding personalization on Meta AI is expected to help the company understand user interests and preferences, as well as identify the most relevant content across the META platform. The company has started testing Meta AI business assistant with advertisers, which helps with tasks like campaign optimization and account support.
Meta Platforms introduced several new features across its platforms to enhance user engagement and monetization. On Instagram, Reels watch time increased by more than 30% year over year due to ranking optimizations and improved content recommendations. Facebook saw double-digit growth in video time, with a 7% lift in views of organic feed and video posts driven by ranking improvements. Threads experienced a 20% increase in time spent due to recommendation enhancements. Meta Platforms also launched AI dubbing for videos in nine languages, driving incremental time spent on Instagram.
WhatsApp is an extremely prized possession of Meta Platforms. In the fourth quarter of 2025, WhatsApp expanded its paid messaging capabilities, crossed a $2 billion annual run rate, and introduced business AI tools that facilitate more than one million weekly conversations between users and businesses. New WhatsApp features, including smarter storage management, cross-platform chat transfer, dual accounts on iOS, AI-powered photo editing, sticker suggestions, and enhanced AI writing assistance, are expected to improve user experience.
Meta Platforms expects to use the models developed by Meta Superintelligence Labs to deliver compelling and differentiated AI products. The company has a strong pipeline of ad supply opportunities on both Threads and WhatsApp Status over the long term. Ads are now running globally in Feed on Threads, and META plans to optimize the ad formats and performance before increasing supply. The company has extended its Andromeda ads retrieval engine so it can now run on NVIDIA NVDA, Advanced Micro Devices AMD and MTIA.
META Rides on Expanding Partner Base
Broadcom expands a long list of Meta Platforms partners that includes the likes of NVIDIA, AMD, and Arm. META and Arm are collaborating to develop a new class of CPUs to support growing AI workloads and general-purpose computing. The first release of this multiple generations of cutting-edge CPUs – Arm AGI CPU – is delivering faster performance per rack, far more efficiently than legacy CPUs. META’s AMD deal will see it using the latter’s custom MI450, along with 6th-generation EPYC CPUs, running on ROCm software and built on the AMD Helios rack-scale architecture.
NVIDIA’s collaboration with META will see it supporting the latter’s build-out of data centers optimized for AI training and inference, as well as its core business. META’s data centers are pivotal to bringing personal superintelligence and a better app experience to everyone across its platforms. These data centers consume huge amounts of electricity, and META is now tapping nuclear energy to fulfill this requirement. The company has signed long-term nuclear power agreements with Vistra, TerraPower and Oklo that are designed to supply up to 6.6 GWs of nuclear electricity by 2035.
META Underperforms Sector, Shares Overvalued
Meta Platforms shares have climbed 2.5% year to date, underperforming the broader Zacks Computer & Technology sector’s appreciation of 4.3%.
META Stock’s Price Performance
Image Source: Zacks Investment Research
Meanwhile, META shares are overvalued, as suggested by the Value Score of C. In terms of the forward 12-month price/sales (P/S), META is trading at 6.52X, a premium compared with the broader sector’s 6.38X.
META Stock’s Valuation
Image Source: Zacks Investment Research
Here’s Why You Should Hold META Shares Now
Meta Platforms is spending heavily on expanding AI infrastructure, which is expected to squeeze free cash flow. META now expects 2026 capital spending between $115 billion and $135 billion. Aggressive spending with 2026 operating expenses projected between $162-$169 billion is expected to hurt earnings prospects in the near term. This, along with stiff competition in the ad market and a stretched valuation, is a headwind for prospective investors.
The Zacks Consensus Estimate for 2026 earnings is pegged at $29.78 per share, down by a nickel over the past 30 days, suggesting 26.78% growth from the figure reported in 2025.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
However, Meta Platforms now expects to invest significantly more over the next few years in developing more advanced models and the largest AI services in the world. This bodes well for investors already holding the stock.
META currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).