This has been a forgettable year for Meta Platforms (NASDAQ: META) investors so far. Shares of the tech giant are down 5% as of this writing, underperforming the tech-laden Nasdaq Composite index that has logged 11% gains in 2026.
Concerns about Meta’s aggressive capital spending on artificial intelligence (AI) projects and the potential returns of these investments have weighed on its stock price this year. However, the Magnificent Seven stock jumped nearly 9% on July 1 after a report emerged that it may be entering the lucrative AI cloud market.
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Let’s see what this potential move may mean for Meta stock.
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Meta Platforms can unlock a multibillion-dollar opportunity with this move
According to Bloomberg News, Meta Platforms is planning to sell its excess AI cloud computing capacity to customers. It was easy to see why this report gave Meta stock a big boost. The company is on track to spend $135 billion in capital expenditure this year at the midpoint of its guidance range, up significantly from $72.2 billion last year.
Meta has been spending heavily to integrate AI tools across its applications and advertising offerings, as well as to build frontier AI models (the most advanced kind of foundational AI models) through its Superintelligence Labs division. The good news is that these investments are driving tangible gains for Meta.
The company’s Muse Spark advanced AI model, which is the first one to be launched by Meta Superintelligence Labs and powers the Meta AI assistant, has led to a double-digit percentage increase in user sessions on Meta AI. Additionally, the Meta AI business assistant is resolving its clients’ issues at 20% faster, while the number of advertisers using the company’s generative AI creative tools now stands at more than 8 million.
Meta is also pushing the envelope in AI wearables. The daily users of its AI glasses doubled year over year in Q1. Still, the toll that Meta’s heavy spending may take on its bottom line has got the market worried. So, when reports emerged that this tech giant would start selling its AI cloud excess capacity, investors heaved a sigh of relief.
This will allow Meta to monetize the unused cloud computing capacity in its inventory, mitigating Wall Street’s worries that it is overspending on AI infrastructure. This could be a smart move if Meta indeed decides to rent out excess infrastructure. Also, Bloomberg News reports that Meta will offer access to its AI models to customers renting AI compute capacity, in addition to raw compute capacity to run their own models and applications.
Meta, therefore, could be poised to enter the massive AI cloud market that’s expected to generate $267 billion in revenue in 2030, according to Gartner. Entering this market will supercharge Meta’s already impressive growth. The company’s Q1 revenue increased 33% year over year to $56.3 billion. However, aggressive capital spending resulted in a smaller 14% increase in its adjusted earnings per share (after excluding the one-time income tax benefit of $3.13 per share).
However, as Meta’s investments in AI infrastructure start paying off, its bottom-line growth should also accelerate, following an estimated 8.5% jump in 2026.
Also, if Meta enters the cloud AI market like other Magnificent Seven companies, it could clock faster growth than Wall Street’s expectations.
The stock’s valuation and upside potential make it a no-brainer buy
Meta’s underperformance this year explains why the stock is trading at attractive levels. It has a trailing earnings multiple of 21, a significant discount to the Nasdaq Composite’s earnings multiple of 39. Of course, Meta’s tepid earnings growth explains why it is cheap right now. However, a potential acceleration in growth could eventually lead the market to reward it with a higher valuation, resulting in more upside.
On the other hand, Meta is trading at 7 times sales, a slight premium to the Nasdaq Composite’s average sales multiple of 5.3. The gains that Meta’s AI tools are bringing for advertisers, along with its reported entry into AI cloud infrastructure, could help it exceed Wall Street’s growth estimates over the next three years.
Analysts are anticipating a 26% jump in Meta’s revenue this year. That’s expected to be followed by healthy double-digit growth in 2027 and 2028, albeit at a slower rate.
Meta could exceed those numbers, especially given its growing share of the digital ad market. According to eMarketer, Meta’s digital ad market share could hit 27% in 2026, surpassing Google. This indicates that the integration of AI tools into Meta’s advertising platform is paying off. Given that the digital ad market’s revenue is expected to surpass $1.5 trillion in 2030, there is a strong likelihood of Meta cruising past consensus revenue estimates.
But even if it generates $354 billion in revenue in 2028 and maintains its 7x sales multiple, its market cap could jump to $2.5 trillion. That suggests a potential 60% upside over three years, which is why investors should consider buying this AI stock while it trades at attractive levels.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
