As Meta Platforms Unveils Muse Spark, Should You Buy META Stock Now?

After Meta Platforms (META) released a new AI model, which it has named Muse Spark, investors should first seek to determine whether the new product can be a needle mover for the company before buying META stock. Importantly, Meta's track record with AI models is not stellar, and the company itself appears to be downplaying the potency of Muse Spark.

Moreover, amid high gasoline prices that are likely to result in reduced consumer spending, Meta seems to have a great deal of exposure to these macroeconomic trends. Finally, two other Magnificent Seven names - Microsoft (MSFT) and Amazon (AMZN) - appear to have much bigger, potential, positive, medium-to-long-term catalysts than Muse Spark.

About Meta

The owner of Facebook and Instagram, two of the world's most popular social-media websites, almost all of Meta's revenue is derived from advertising.

In the fourth quarter, the company's revenue surged 24% versus the same period a year earlier to nearly $60 billion, but its income from operations rose only 6% year-over-year (YOY) to $24.75 billion.

META stock has a market capitalization of $15.5 trillion and a forward price-earnings ratio of 19.34 times. As of the market close on Apr. 8, the shares had dropped 4.41% year-to-date (YTD). 

An Underwhelming Track Record and a Lack of Enthusiasm

According to CNBC, the launch of Meta's open-source AI models roughly a year ago did not succeed in captivating developers, leading to disappointing results and preventing the firm from becoming a major player in the AI-model sector. Meanwhile, the company itself described Muse Spark as “ small and fast by design, yet capable enough to reason through complex questions in science, math, and health." Based on those descriptions, it doesn't sound like Meta believes that the model will upend the AI-model market or quickly become a huge difference-maker for the company as a whole.

In light of all of all of these points, investors should not assume that Muse Spark will be a positive needle-mover for the tech giant, even though it hired an AI whiz, Alexandr Wang, last June to help lead its efforts to develop more effective AI models.

Meta May Be Significantly Hurt by Macro Trends

Elevated gasoline prices are likely to cause consumer spending to drop globally, hurting the many consumer-product makers that advertise on Meta. And since advertising is often among the first expenditures that companies cut during tough times, Meta's revenue growth could drop significantly in the near-to-medium term.

Two Other Big-7 Names Look Much More Favorable

First, Amazon is already benefiting tremendously from AI, as its AWS unit is growing rapidly, partly due to the strong demand for the AI tools that it markets. As the technology proliferates further, AWS' growth is likely to accelerate considerably. Also importantly, Amazon Leo, by supplying internet service more cheaply than existing technology, at least in rural areas, will probably become an important, positive catalyst for AMZN stock. Further, Leo is off to a fast start when it comes to attracting major corporate customers.

Second, Microsoft is also benefiting meaningfully from selling AI infrastructure, while its new AI tools appear to have a great deal of potential. Additionally, overdone worries about MSFT stock have created an excellent buying opportunity.