For several years, investors have rewarded large tech conglomerates in the “Magnificent Seven” that announced plans to ramp up capital expenditures for artificial intelligence (AI) infrastructure. The thinking was that these companies would only make such a large investment if they believed it would yield strong returns.
However, in recent months, investors have begun to question whether the returns would really be as promising as many initially believed. Suddenly, AI capex was no longer rewarded, especially as companies began taking on debt to fund some of these ambitions.
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However, following Meta Platforms‘ (NASDAQ: META) recent quarter, CEO Mark Zuckerberg said he has no plans to slow AI capex, which the market did not seem to mind, given Meta stock’s strong performance following the earnings release on Jan. 28. Zuckerberg is full steam ahead, apparently much to the market’s delight.
Image source: Getty Images.
If you want to prove to people that further investments in artificial intelligence are warranted, show them results. That’s exactly what Meta did in its recent 2025 fourth-quarter earnings release.
The company generated earnings well above consensus estimates and beat revenue by about $1.3 billion, while providing forward guidance ahead of analysts’ expectations. Most of the performance can be attributed to advertising, which rose approximately 24% year over year. Meta has invested significantly in AI to enhance its advertising business, and the moves appear to be working.
In a recent memo, Meta said it doubled the number of graphics processing units (GPUs) used to train the company’s ads ranking model. The purpose is to better choose the ads that align with audience interests. Meta also uses an AI business assistant to help companies improve their advertising campaigns and reach account support.
Meta is also using AI to power more creative campaigns. The company’s video generation tools collectively achieved an annual revenue run rate of $10 billion. The division also grew 3 times faster than the company’s overall ad business in the previous quarter. This is what the market wants to see in AI: clear monetization.
Meta guided for capex associated with AI to come in a range of $115 billion to $135 billion this year, ahead of consensus Wall Street expectations of nearly $111 billion. The company spent just over $72 billion on capex in 2025.
“As we plan for the future, we will continue to invest very significantly in infrastructure to train leading models and deliver personal super intelligence to billions of people and businesses around the world,” Zuckerberg said on Meta’s earnings call.
The company’s investments are in Meta’s Superintelligence Labs and its core ad business. The superintelligence division’s goal is to build AI solutions that can replicate, and even surpass, human cognitive capabilities.
It’s important for investors to understand that while the market has, in effect, given Zuckerberg the green light to proceed with AI capex, it hasn’t done so over the past year. Even after the big move in the stock following earnings, Meta stock is only up about 8% over the past year (as of Jan. 29).
It’s also important for investors to remember that Zuckerberg has a history of jumping the gun on new technology, and while the famous leader has been right a lot throughout his career, he hasn’t always been right. Meta’s Reality Labs division, which builds hardware and software for virtual reality, has been a flop so far. This was the unit expected to power the metaverse, a virtual world that Meta went all in on and later changed its name to reflect.
However, Reality Labs just reported an operating loss of over $6 billion and has racked up $80 billion in operating losses since the end of 2020. Investors should reward Meta for AI spending that boosts the company’s core ad business, but keep a careful eye on Zuckerberg if he starts to dump money into technologies that may not appear able to generate strong returns.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
