Mark Zuckerberg Highlights Potential AI Breakthroughs for Meta in 2025

Meta Platforms (NASDAQ: META) is positioned as a leader in the realm of artificial intelligence (AI). Under the guidance of CEO Mark Zuckerberg, the company has been investing heavily in AI technologies, with a particular focus on potential breakthroughs expected in 2025.

Despite its progress, Meta faces significant competition. For instance, the Chinese company DeepSeek reported that it trained its generative AI platform at a fraction of the cost — only $5.6 million, which raises questions about Meta's substantial infrastructure expenses projected to exceed $60 billion by 2025.

Those familiar with Meta's vision for AI see a clear justification for such investments. Zuckerberg shares that the potential advancements could render models like DeepSeek’s obsolete.

Zuckerberg envisions an engineering AI agent

Meta Platforms, widely recognized by its previous name Facebook, encompasses various social media platforms including Threads, Instagram, WhatsApp, and Messenger, generating substantial revenue mainly through advertising.

This steady revenue stream allows the company to invest boldly in AI development without risking financial instability. Consequently, it's not primarily focused on creating an AI model that matches DeepSeek's cost efficiency, though integrations may occur as suggested by Zuckerberg.

At present, Meta's priority is to develop a powerful AI model rather than solely efficient one. Zuckerberg expresses excitement about a groundbreaking innovation expected in 2025:

"I also expect that 2025 will be the year when it becomes possible to build an AI engineering agent that has coding and problem-solving abilities equivalent to a skilled mid-level engineer. This milestone could be a game changer and create substantial market opportunities in the long run. The first company to achieve this will hold a notable advantage in furthering its AI research and influencing the sector."

Should Meta succeed in creating an AI agent that mirrors the capabilities of a mid-level engineer, it faces two pathways. Firstly, it could reduce a substantial portion of its staff, resulting in significant cost savings and increased profits. Secondly, it could retain its engineers and utilize AI agents to bolster their productivity, effectively multiplying its engineering capabilities and accelerating innovation.

Most likely, the latter option would position Meta favorably in the competitive AI landscape. Additionally, it may yield substantial progress in developing augmented reality (AR) glasses, a project into which Meta has already invested billions.

This scenario alleviates concerns regarding Meta's considerable AI expenditures; the company appears to be on the brink of creating a transformative AI model.

Moreover, this potential makes the stock an intriguing prospect, particularly given its relatively reasonable valuation.

The stock is attractively valued given its growth potential

Currently, AI does not contribute to Meta's revenue, but the company’s advertising arm is thriving. In the fourth quarter, Meta's revenue surged 21% compared to the previous year, reaching $48.4 billion.

Moreover, operational efficiency was evident, with costs rising only 5% year-over-year. This led to an increase in operating margins from 41% to 48%, resulting in significant earnings per share (EPS) growth: a 50% increase year-over-year to $8.02 in the fourth quarter. For 2024, EPS rose 60% year-over-year to $23.86, setting the stock's price at 29 times its trailing earnings.

Given the formidable growth rate, this valuation appears justifiable. However, the stock trades at 27 times its forward earnings, indicating that analysts anticipate limited earnings growth for Meta over the coming year as infrastructure spending rises.

Despite this, the business continues to expand strongly, with management forecasting an 8% to 15% revenue increase in the upcoming first quarter.

Meta Platforms has the potential to deliver monumental advances in AI technology. As the stock is currently valued primarily based on its advertising business, this represents an excellent buying opportunity, especially if the company succeeds in developing the first AI engineering agent.AI, Breakthrough, Meta