Can Meta still compete in the AI arms race? On this episode of Trader Talk, Kenny Polcari and Tom Hayes dig into Meta’s (META) next chapter as the company shifts from social media to AI infrastructure. Hayes explains why Meta’s massive data advantage and ad dominance could make it a dark horse in the AI race, even as investors flock to Nvidia (NVDA) and other chipmakers. They also debate whether Mark Zuckerberg’s pivot to open-source AI is a genius move or a costly distraction in a market obsessed with margins and scale.
Trader Talk with Kenny Polcari on Yahoo Finance delivers expert analysis and actionable insights, empowering you to navigate market volatility and secure your financial future.
This post was written by Langston Sessoms.
00:00 Speaker A
I’m not a metal listener. I don’t own metal. I never did. I was not a Facebook person. I never was. Um, so, so I’m not in that game, right? I’m not going no skin in the meta game. But I thought it was very interesting that after those earnings came out, and I didn’t necessarily think that the earnings were that horrible, but they punished the stock really bad.
00:20 Speaker B
It it’s similar to when he did the massive investment in the Metaverse.
00:24 Speaker A
The Metaverse.
00:25 Speaker B
And, you know, the question we have to look at is, is all of this spending offensive or defensive? Right.
00:35 Speaker A
Okay?
00:35 Speaker B
And do they have a choice in the matter to or are they afraid of seating seating uh seating share effectively if they don’t make all these investments. So that’s when you look at CAPEX levels at the same level as oil. You know, if you remember the stories of these multiples, what was the thing? They’re capX light.
00:58 Speaker A
Right.
00:59 Speaker B
That’s no longer the case. So, you know, when you see cash flow deteriorating, on the one hand, you could say the fact that they’re buying back less shares and investing tells you that they have a better return on capital through investing in AI or at least they believe they’re going to have a better return on capital than in buying back their own shares. For years, it was buy back your own shares because you can’t invest at a higher rate of return. So, on that side, it’s positive. On the side of
1:32 Speaker B
Facebook has yet to show or Meta has yet to show the return on invested capital just like when they were investing in the Metaverse and then all of a sudden he cried uncle and he said, okay, the stock’s down too much, we’re going to stop spending on Metaverse and all of a sudden the stock recovered.
1:45 Speaker A
Right.
1:46 Speaker B
I I don’t know that we’re at that point. you know, from a trading perspective, you say, do I buy uh Meta today, sell Meta today? I don’t think in those terms. Uh but for me, I think there are ways to invest in the benefits of AI uh without taking the risk. I having a greater margin of safety where you can sleep well at night and put large amounts of money to work not worrying if God forbid one of these companies trading at 200 times sales misses by 1%, the stock doesn’t go down 1%.
2:08 Speaker A
Yeah, no, it doesn’t.
2:09 Speaker B
It goes down 50% because it’s like yelling fire in a crowded theater.
2:13 Speaker A
Exactly, right. Which is always the part that’s interesting to me. You know, people will say, you know, but it but it missed it by you know, a small fraction. Yeah, I know, but it was so overvalued to begin with that that it creates that angst in the market.
2:22 Speaker B
So it works until it doesn’t. And by the way, I’m not saying my framework is the only framework. I’m very good at one framework, okay? It doesn’t mean you can’t make a lot of money buying momentum stocks and riding them and buying breakouts and doing all the things that that momentum traders or investors do. That’s a great, it’s just a different discipline.
2:43 Speaker A
Right.
2:44 Speaker B
You know, like one guy’s an orthopedist, one guy’s a heart surgeon, you know, you don’t try to have the heart surgeon do, you know, your knee surgery.
2:51 Speaker A
Yeah, you don’t want the heart surgeon doing my knee replacement. I don’t want the the knee replacement guy doing my heart operation either.
2:57 Speaker B
So because I have one framework, doesn’t mean the other frameworks are wrong or right. They’re different. Right. Yeah, and and they work for people who are wired to do that. So when God was handing out FOMO genes, he didn’t give me one. Right. Okay? And I like I like to buy businesses that are down in price, fundamentals are improving, play the divergence, rinse repeat.
