GOOGL - Meta's Advantage Over Google And Amazon

2024-05-12 04:50:13 ET

Summary

• Meta Platforms’ stock got battered post-earnings, whereas rivals Google and Amazon saw their stocks rallying, despite all three tech companies guiding that they will be engaging in heavy AI-related capex.
• The top three advertising platforms are in a tight race to offer new, powerful generative AI features to capture future ad dollars.
• Meta holds a particular advantage over its key rivals that it is now leveraging to win in the era of AI.

Meta Platforms' ( META ) stock had plummeted by over 13% following its Q1 2024 earnings report in late April, whereas rivals Google and Amazon saw their stocks rallying post-earnings, despite all three tech companies guiding that they will be engaging in heavy AI-related capex over the next year. Meta's less positive revenue outlook relative to Google ( GOOG ) and Amazon's ( AMZN ) core businesses indeed made investors wary. While the three tech giants run different kinds of businesses, they all have enormous advertising revenue segments, and will be competing ferociously for future ad dollars in the new era of AI.

In the previous article, I had downgraded Meta stock to a 'hold', given the regulatory and legal headwinds facing the company. Amid the child exploitation issues on Meta Platforms, the company could potentially be banned from monetizing the user data of young teens and children, threatening revenue growth potential going forward.

In this article, we will be delving into how Meta is evolving its business messaging feature in the era of generative AI to drive returns for shareholders. Amid the tightening competition between the top three advertising platforms, Meta holds a particular advantage as generative AI-powered chatbots become increasingly prevalent in facilitating various forms of commercial activities. Though I am still maintaining a 'hold' rating on the stock, and META could potentially underperform relative to its main rivals over the next year.

Generative AI transforming tech platforms

With the generative AI revolution in full swing following the rise of ChatGPT, all three major advertising giants, Meta, Google and Amazon, are striving to transform the consumer experiences on their platforms through chatbot-based search and discovery features. This includes the Meta AI assistant, Google's Gemini and Search Generative Experience [SGE], and Amazon's Rufus....

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