Meta Platforms vs. Microsoft: Which AI Superpower is a Better Buy?

Core Insights - Meta Platforms and Microsoft are emerging as leaders in artificial intelligence (AI) with substantial investments in AI infrastructure and applications [1] - Meta is planning to invest between $64 billion and$72 billion, while Microsoft anticipates increased capital expenditures to support growth in cloud offerings and AI investments [1] Investment Opportunities - Meta Platforms is focusing on enhancing advertisers' return on ad spending through its proprietary machine learning system, Andromeda, which is powered by NVIDIA [2] - The launch of a new Generative Ads Recommendation model has resulted in a 5% increase in conversion rates for Facebook Reels [3] - Meta's recommendation system improvements have led to a 7% increase in time spent on Facebook, a 6% increase on Instagram, and a 35% increase on Threads over the past six months [3] Product Developments - Meta is emphasizing personalization and entertainment in its AI initiatives, including the launch of a standalone Meta AI app and growing sales of Ray-Ban Meta AI glasses and Quest [4] - Microsoft has over 60,000 Azure AI customers, reflecting a nearly 60% year-over-year increase [5] - The Azure AI Agent Service has been utilized by over 10,000 organizations, and Microsoft's Phi small language models have achieved 38 million downloads [6] Performance Metrics - Microsoft 365 Copilot is expanding rapidly, with usage increasing threefold compared to the previous year, and it has been adopted by over 230,000 organizations, including 90% of the Fortune 500 [7] - Meta Platforms shares have outperformed Microsoft year-to-date, with a 12.5% appreciation compared to Microsoft's 7.5% [8] Earnings Estimates - The Zacks Consensus Estimate for Meta's 2025 earnings is $25.52 per share, indicating a 6.96$13.30 per share, suggesting a 12.71% growth over 2024 [12] Valuation Insights - Meta Platforms shares are trading at a forward 12-month Price/Sales ratio of 8.57X, which is lower than Microsoft's 10.9X, indicating that Meta is relatively cheaper [14] Conclusion - While both companies are leveraging AI for growth, Microsoft is better positioned due to strong adoption of its AI services and products, earning it a Zacks Rank 2 (Buy) compared to Meta's Zacks Rank 3 (Hold) [16]