Say goodbye to metaverse-style “blindly smashing money”! Rental infrastructure, Meta (META.US) uses AI to monetize to rebuild Wall Street trust

The Zhitong Finance App noticed that in just two weeks, Meta (META.US) has gone from being a supporting actor forgotten by the market to becoming one of the hottest stocks. Investors have finally bought into the AI plans described by the company.

The stock rose 17% in July, making it the third-best performing stock in the S&P 500 and is expected to record its best monthly performance since May 2025. This is a huge reversal from June, when Meta fell 11%, and its performance was almost at the bottom of the S&P 500. Although the stock has only been flat since this year, this is a huge improvement compared to the first half of the year, when it fell 15% and was one of the weakest performing stocks among large technology stocks.

Meta shares soared to become the third-best stock in the S&P 500 in July

The rebound began on July 1, when media reports said that Meta was developing a cloud computing business plan, which boosted the stock up 8.8% on the same day. Last week, CEO Zuckerberg said that Meta is considering leasing part of its AI infrastructure to external agencies in view of strong demand for computing power capacity. The social media giant also recently launched a new version of its AI model, Muse Spark 1.1, which includes a new payment tier for developers, and is the first time Meta is charging businesses for access to its models.

John Belton, fund manager of Gabelli Funds, who holds Meta shares, said, “If the catalyst comes into play, trading stocks with really low valuations like Meta will have more room to rise, or their performance will be more like a compressed spring.”

As Belton said, the previous sell-off left Meta's stock at a historic low. The stock is currently priced at about 16 times the expected earnings over the next 12 months, while its 10-year average is more than 20 times. It has the lowest valuation among the “Big Seven Tech” and has discounts on both the S&P 500 and Nasdaq 100 indices.

In late June, Meta's price-earnings ratio had dropped to around 13 times its forward-looking earnings. This is the lowest level in its history, second only to the inflationary collapse in 2022 and early 2023, which also coincided with the company launching a highly controversial and expensive metaverse project.

It's been a long downturn for Meta's stock. The stock hit a high of $790 on August 12, 2025, but fell about 30% over the next 10 months, closing at around $563 at the end of June. Part of the decline was due to wider market rotation — investors sold shares of high-spending AI companies such as Meta to buy shares of chipmakers, memory makers, and other companies that could benefit from hundreds of billions of dollars in capital expenditure.

Meta's valuation has continued to decline over the past year

But this trend is also related to Meta's own situation. Although the company saw early signs of AI boosting ad revenue, it was difficult to explain how it would apply this technology across its businesses. Furthermore, its big language model lags behind competitors such as OpenAI's ChatGPT and Anthropic's Claude.

The trigger for the latest round of decline was the company's last earnings report released on April 29. At the time, the company raised its 2026 spending outlook due to additional data center costs and “higher component pricing.” Soon after, a day later, Meta issued $250 million in bonds to fund part of its AI spending. The announcements have fueled investors' concerns that Meta's massive AI spending might not pay off. It also brings back memories of 2022, when Zuckerberg placed a heavy bet on the metaverse, but it didn't work out.

Lack of trust

Angelo Zino, head of the CFRA technical team, said, “The compression of valuation multiples is largely related to the lack of trust in Meta in the investment community.”

Clearly, Wall Street has been looking for signs that the company's AI plans are more specific than simply throwing money away. Now, as results begin to show promise, investors have found a new reason to buy the stock.

Wall Street is optimistic about the company, and out of 79 analysts who have studied the stock it followed, 73 gave it a rating equivalent to a buy. The average price target of around $816 means the stock will rise more than 23% over the next 12 months.

Meanwhile, Meta hasn't slowed down its spending. This week, the company added an additional $4 billion for a data center campus in Louisiana, bringing the site's total estimated investment to more than $25 billion.

Dan O'Keefe, chief fund manager of Artisan Partners Global Value Group, who holds Meta shares, said, “As jurisdictions boycott these constructions, political and social pressure may slow or even disrupt some of these investments,” “so I think making this huge investment ahead of time was the right decision, and I do see that it can pay off for the business.”

Investors will get more information when Meta reports second-quarter results at the end of July. The company is expected to record a 27% increase in revenue, while earnings per share are roughly the same as in the same period last year. But as always, what investors are most eager to get is the latest developments in AI and the direction of Meta's various businesses.

CFRA's Zino said, “If you look back at Meta's performance over the past two years, they've probably monetized AI better than anyone else within the core ecosystem,” and “now, based on this, they have shown some diverse capabilities and new initiatives, combined with their valuation, which lays a very good foundation for a strong rebound in the next few quarters.”