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Time to look back on some of 2024's Magnificent 7 stock gains.
Nvidia (NVDA) is up 170% this year, followed by Tesla's (TSLA) 90% surge. Meta Platforms (META) ranks third, rallying 75%.
Unlike Nvidia and Tesla, which deliver physical products, Meta earns the bulk of its revenue by selling ads on its platforms, including Facebook, Instagram, and WhatsApp.
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Businesses pay Meta to display highly targeted ads to specific user groups based on their demographics, interests and online behavior.
This is the art of artificial-intelligence-driven advertising. Meta uses AI algorithms to improve ad relevance and performance, making its ads attractive.
“They have to infer your interest, which is substantially harder to do, and Meta does that very well,” Mark Douglas, chief executive of advertising software maker MNTN, told TheStreet.
Meta expands AI role beyond ads
Meta's AI capabilities extend far beyond just increasing ad sales.
The social media giant rolled out its AI Studio in July, enabling users to create AI characters that help people find interests, get information, and more. For example, an AI chef character can offer personalized tips for local dining.
Nvidia Chief Executive Jensen Huang spoke with Meta CEO Mark Zuckerberg in July and recognized Meta as a leader in AI.
“Every single restaurant, every single website will probably, in the future, have these AIs,” Huang commented on Meta’s AI initiative.
Related: Legendary billionaire tech investor makes an amazing claim about Nvidia's stock
Meta just unveiled new features on its Ray-Ban smart glasses, including live AI and real-time translations.
The Ray-Ban smart glasses are part of Meta's Reality Labs division. Meta sees it as a long-term opportunity to diversify revenue beyond its core ad business.
The smart-glasses business so far has been operating at a loss. For the third quarter Reality Labs reported a loss of $4.4 billion.
Meta has been spending billions to build out AI, including purchasing Nvidia’s GPUs to help improve its core ad business.
In October, Meta raised low end of its 2024 capital expenditure guidance, setting a range of $38 billion to $40 billion instead of the previous estimate of $37 billion to $40 billion.
Related: Meta earnings blast forecasts, but Facebook parent sees big capex increase
In Q3, Meta earned $6.03 a share, surpassing analysts’ estimate of $5.25, on revenue of $40.59 billion, exceeding expectations of $40.29 billion.