Meta’s AI spending comes under the microscope as analysts weigh whether the stock is still cheap

Meta Platforms’ share price weakness has renewed debate over whether the market is underpricing the company’s long-term earnings potential, particularly as it spends heavily on artificial intelligence across its ad business and social platforms.

In a market note published by Yahoo Finance, the author argues that Meta still “screens” as undervalued when evaluated two ways: first, through a discounted cash flow (DCF) approach, which estimates what future free cash flows are worth today; second, through earnings-based valuation multiples, which compare the stock’s price to metrics tied to profitability. The piece frames Meta’s recent price declines as a potential setup for investors who believe those models capture value that the stock is not currently reflecting.

The article’s central tension is that Meta’s AI buildout is both costly in the near term and, if it improves ranking, targeting, and content recommendations, potentially profitable over time. The market note ties the valuation question to “heavy AI spending,” highlighting that higher investment can pressure earnings and cash flow in the short run even if it is intended to strengthen performance later.

The author also points to the fact that Meta’s stock has fallen sharply over the past year, using that decline as the basis for the “undervalued” claim. In that framing, the market may be discounting not only current AI costs, but also uncertainty around how quickly those AI investments translate into higher revenues, better ad efficiency, or new monetization opportunities.

What the note does not do, at least in the accessible material, is lay out specific valuation inputs such as the assumed discount rate, terminal growth, or which earnings multiple it uses (for example, whether the comparison is to forward earnings or trailing earnings). It also does not provide a detailed breakdown of how AI spending is expected to trend, how much is allocated to particular AI products, or whether cost growth is moderating.

For context, Meta’s business depends heavily on advertising delivered through Facebook, Instagram, and other services. In recent years, AI has become a key lever inside those products, influencing how content is ranked and how ads are targeted. That makes the company’s spending decisions particularly relevant to both short-term financial results and longer-term competitiveness, because better automation can improve engagement and ad return, while inefficiency can erode margins.

Looking ahead, the key question for investors is whether Meta’s AI spend translates into measurable improvements that show up in financial reporting, such as revenue durability and margin resilience. Another is whether the market’s valuation reset after the decline over the past year proves too pessimistic or, conversely, correctly reflects risks that the models do not capture.

For editorial review, readers may want to treat the “undervalued” conclusion as a model-based opinion rather than a confirmed re-rating. Without the note’s underlying math, the argument’s credibility hinges on assumptions that can swing outcomes significantly, and the company’s own disclosures about spending efficiency and AI-driven performance are what would ultimately validate or refute the thesis.