Why Meta's newest AI-based products are set to boost the social media giant's near-term growth

Why Meta’s newest AI-based products are set to boost the social media giant’s near-term growth

Meta ‘s (META) latest slate of artificial intelligence offerings — including a higher-resolution mixed-reality headset — not only solidify the tech giant’s position as a leading contender in the AI arms race, but should also translate into higher earnings for the Instagram parent over the next year. Meta’s AI initiatives are likely to be a key aspect of how it monetizes products and services going forward, while bringing more users and customers into the AI fold. During Meta’s Connect virtual AI conference Wednesday, the company unveiled the Quest 3 , the newest version of its mixed-reality headset; an AI-based personal assistant called Meta AI; AI image-generating and editing tools; and a new edition of Ray Ban smart glasses, the latest iteration of Meta’s partnership with EssilorLuxottica. Each development is expected to help drive AI usage into the mainstream across the company’s bundle of social media apps. Although Meta’s Quest is “not as good as the Vision Pro from Apple” Jim Cramer said Wednesday , the launch of Meta’s new headset is likely to have more broad-based appeal as it leverages more budget-oriented chips, lenses and sensors. We see merits to both Club holdings’ strategies. Whereas Meta’s headset is priced for mass-market adoption, Apple’s headset is clearly a premium device targeted to those who demand the most cutting-edge technology — such as micro-OLED lenses with eye-tracking capabilities . As such, the starting price for Apple’s headset is seven-times the cost of the Quest 3 base model. Both approaches can win in the current AI consumer market. Meanwhile, Meta’s virtual assistant, Meta AI — built on the company’s large language model , Llama 2, with search functionality powered by Microsoft ‘s (MSFT) Bing — will be available on WhatsApp, Messenger, Instagram, Quest and the Ray-Ban smart glasses. Wall Street largely reacted favorably, with many analysts praising Wednesday’s announcements. Meta stock was up roughly 2.3% Thursday, at around $304.44 a share. Meta’s AI assistant “could prove to be a [total addressable market] expansionary event for Meta that opens up new use cases and monetization streams,” according to KeyBanc. Similarly, JMP Securities argued that the event “highlights Meta’s AI tailwinds,” which could “unlock additional advertising budgets with new chat-based customer service.” Bottom line Most of the AI updates this week should be financially material in the near term to Meta because they are likely to enhance the current breadwinners at the company – namely, Meta’s family of apps. By empowering business customers to better serve their clients with custom AI chatbots, Meta will be able to increase engagement more broadly and better target advertisements thanks to the increased data these interactions will generate. At the same time, enhanced AI-based content creation tools stand to bolster user engagement on the company’s various platforms, while helping businesses and their customers. Meanwhile, we expect adoption of Meta’s Quest 3 hardware to grow. For now, the headset may appear to be relatively niche, but the potential of these types of products is becoming increasingly clear and should be on the radar of all long-term investors. We also like that Meta has chosen to focus on keeping the price of the Quest 3 relatively low, which should allow it to increase its hardware customer base and compete with Apple ‘s [AAPL] premium headset. The price point should also support developer efforts to build out the platform. The latest iteration of the Ray Ban glasses, however, is less material to the company’s near-term financials. But the integration of the Meta AI assistant into that platform should ultimately make the glasses a more valuable product over time. (Jim Cramer’s Charitable Trust is long META, AAPL, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Meta founder and CEO Mark Zuckerberg speaks during Meta Connect event at Meta headquarters in Menlo Park, California on September 27, 2023.

Josh Edelson | AFP | Getty Images

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