Meta’s Sudden Stock Rebound Shows Investors Endorse AI Plans

(Bloomberg) -- In the span of just two weeks, Meta Platforms Inc. has gone from a market afterthought to one of its hottest stocks, as investors finally like what Facebook's parent is saying about its artificial intelligence plans. Most Read from Bloomberg Thailand Scraps Plan to End Visa-Free Entry for Indian Tourists Trump Drops 20% Fee for Hormuz Cargo After Gulf Pressure US Hits Iran With Strikes, Blockade as Trump Plans Hormuz Charge OpenAI's First Device Will Be Movable, Screenless Speaker Built as AI Companion 'We Faltered': IBM Plunges Most Since at Least 1968 on Miss The shares are up 17% in July, making them the third-best performer in the S&P 500 Index and on track for their best month since May 2025. That's a huge turnaround from June, when Meta dropped 11%, putting its performance near the bottom of the S&P 500. The stock is still only flat for the year, but that's a vast improvement from the first half, when it lost 15% and was among the weakest performers in Big Tech. The rally got started on July 1 when Bloomberg News reported that Meta was developing plans for a cloud-computing business, which sent the stock up 8.8% that day. Last week, Chief Executive Officer Mark Zuckerberg said Meta is considering renting some of its AI infrastructure to outsiders given the high demand for computing capacity. The social media giant also recently unveiled a new version of its AI model, Muse Spark 1.1, that includes a new paid tier for developers, the first time Meta has charged businesses to access its models. "If a catalyst starts to play out, a stock trading at a really depressed valuation like Meta, has more upside or can act more like a coiled spring," said John Belton, portfolio manager at Gabelli Funds, which owns Meta shares. To Belton's point, the selloff has made Meta's stock historically cheap. The shares are priced at about 16 times earnings estimated over the next 12 months, compared with their 10-year average of more than 20. It has the lowest valuation among the Magnificent Seven tech giants and trades at a discount to the S&P 500 and Nasdaq 100 indexes. In late June, Meta's multiple sank to around 13 times forward earnings. That's the lowest it has been at any point in its history other than during the inflation collapse in 2022 and early 2023, which also coincided with the launching of the company's controversial and expensive metaverse project. It's been a long slide for Meta's stock, which hit a high of $790 on Aug. 12, 2025, and proceeded to fall roughly 30% over the next 10 months, ending June around $563. Part of the decline was the result of a broader rotation in the market, where investors sold the shares of the big AI spenders, like Meta, and bought those of chipmakers, memory manufacturers and other companies that are benefiting from hundreds of billions of dollars in capital expenditures. Story Continues But the move also was specific to Meta. The company saw early signs of AI boosting advertising revenue, but it struggled to show how it would use the technology across its businesses. In addition, its large language model trailed competitors like OpenAI's ChatGPT and Anthropic's Claude. The trigger for the most recent leg lower was the company's last earnings report on April 29, when it raised its 2026 spending outlook in part because of additional data center costs and "higher component pricing." Then, a day later, Meta sold $25 billion of bonds to fund part of its AI spending. The announcements stoked investors' fears that Meta's heavy AI spending won't pay off. And it brought back memories of 2022, when Zuckerberg made a big bet on the metaverse that didn't pan out. Lack of Trust "The multiple compression had a lot to do with the lack of trust from the investment community on Meta," said Angelo Zino, head of the technology team at CFRA. Clearly, Wall Street was looking for signs that the company's AI plans were more concrete than simply throwing around money. Now that the results are starting to show promise, investors are finding reasons to buy the shares again. Wall Street is bullish on the company, with 73 of the 79 analysts tracked by Bloomberg who follow the stock giving it a buy-equivalent rating. The average price target of about $816 implies that the shares will rise more than 23% over the next 12 months. Meanwhile, Meta hasn't slowed its spending. This week, the company committed an additional $40 billion for a data center campus in Louisiana, bringing the expected total investment in the site to more than $250 billion. "There's the possibility that political pressure and societal pressure could slow down or even cut off some of these investments as jurisdictions push back on these buildouts," said Dan O'Keefe, lead portfolio manager of the Global Value team at Artisan Partners, which owns Meta shares. "So I think it's been the right call to front-end this massive investment, and I do see it generating returns for business." Investors will know more when Meta reports second-quarter results at the end of July. The company is expected to post 27% revenue growth and earnings per share that are essentially flat from a year ago. But as is so often the case, investors will be most eager for updates on where things are headed in AI and Meta's various businesses. "If you actually think about Meta here over the last couple years, they've probably monetized AI just about better than anybody within their core ecosystem," CFRA's Zino said. "And now being able to show some diversification on top of that, and new initiatives, especially with the valuation, that sets you up pretty nicely for a very strong rally here over the next couple of quarters." Tech Chart of the Day South Korean President Lee Jae Myung said the nation's stock market surged in a short period and would need time to stabilize, after his administration faced criticism for the extreme volatility blamed by some on leveraged products. Korean stocks have turned choppy in recent weeks, after a world-beating rally fueled by a pair of chipmakers made the $4 trillion market vulnerable to shifts in AI trade sentiment. Top Tech News ASML Holding NV lifted its annual sales forecast for the second time this year and laid out plans to increase production as a surge in artificial intelligence spending drives demand for the Dutch company's chip-making machines. OpenAI's much-anticipated push into consumer devices is slated to begin with a mobile, screen-free smart speaker designed to be a new type of home computer for the AI era, according to people familiar with the matter. Payment processing firm Stripe Inc. and private equity firm Advent International offered to buy fintech pioneer PayPal Holdings Inc. at a valuation topping $53 billion, Reuters reported, citing people familiar with the matter. International Business Machines Corp. shares slid the most in at least 58 years after the company reported preliminary second-quarter sales that fell short of expectations, attributing the miss to customers shifting their spending to chips and servers amid AI-fueled shortages. Earnings Due No major earnings expected --With assistance from Soo-Hyang Choi, Sangmi Cha and David Watkins. Most Read from Bloomberg Businessweek Credit Card Holders Are Using 'Friendly Fraud' to Get Back at Retailers Job Hunters Are Using AI to Cheat in Interviews, and Failing at the Office How Brands Sneak In Cheaper Ingredients to Protect Their Profit Margins The Shattering of the Middle East's Most Unlikely Friendship CoverGirl Stops Chasing Gen Z to Focus on Middle-Aged Women ©2026 Bloomberg L.P. View Comments