Meta is visibly seeing a return on investment from AI, says Rosenblatt Securities’ Barton Crockett

AI and Market Competition - The LLM benchmark is likely to be a horse race, with OpenAI and Meta possessing significant capital and expertise [3] - The market initially priced Alphabet (Google) as the sole winner in the LLM/AI space, but this view may be too simplistic [4] - Meta is demonstrating a clearer return on investment (ROIC) on AI spending compared to other companies [5] Meta's AI Strategy and Performance - Meta's AI spending has accelerated ad growth into the 20-25% range [6] - Meta has $60 billion in annualized recurring revenue (ARR) from its end-to-end AI performance ad tools [6][8] - Meta's potential capital expenditures (capex) could increase by $60 billion from $40 billion in 2024 to over $100 billion next year, largely covered by the ARR from AI performance tools [6][8] - Meta is getting a great return on investment from AI spend, which is helping user engagement [9] Advertising Industry Trends - Legacy media, particularly linear television, is losing advertising funds to performance media [11] - AI has boosted Meta's ad growth more significantly than it has for Google's search and YouTube [11] - Performance marketing is benefiting from a significant share shift in advertising [12] Other Companies to Watch - Amazon, particularly AWS, is starting to show a return on investment from AI, with new deals and upcoming announcements [14] - Amazon's e-commerce business is expected to benefit from AI-powered assistant tools like Rufus [15]