Meta has been massively investing on artificial intelligence and it has been an ongoing concern for a section of the investors as well. But, Nvidia CEO Jensen Huang believes the market is missing the bigger picture.
Huang praised Meta’s use of AI and argued that the company is already seeing strong business results from its investments. “Nobody uses AI better than Meta,” Huang said while speaking to CNBC on Tuesday. He added that Meta’s AI systems have transformed how its platforms recommend content, serve advertisements and help businesses create marketing material.
He further added, “AI went from a classical recommender system running on CPUs to now a generative AI, agentic system that is making recommendations. Everything from the way the social media works and the way they recommend ads and help advertisers create content has fundamentally been changed, and their earnings show it, and that’s the reason why they’re investing so hard, they see just a much larger future potential for it.”
AI is reshaping Meta’s advertising business
According to Huang, investors are paying too much attention to Meta’s planned capital expenditure of $125 billion to $145 billion in 2026 and not enough attention to the benefits AI is already delivering. Over the past few years, Meta has steadily replaced traditional recommendation systems with AI-powered models that can generate advertising creatives, identify target audiences and optimise campaigns in real time.
The company’s huge scale gives it a significant advantage. Meta’s platforms reach around 3.56 billion daily active users, providing its AI systems with vast amounts of data to improve recommendations and advertising performance. The impact is showing up in the company’s financial results. In the first quarter of 2026, Meta Platforms Inc reported revenue of $56.3 billion, up 33% from a year earlier. During the same period, ad impressions increased 19% while the average price per advertisement rose 12%.
New AI tools are creating additional revenue streams
Meta has also been expanding a range of AI-powered advertising products that are becoming meaningful contributors to revenue. Its AI video-generation tools for advertisers reportedly reached a $10 billion annual revenue run rate in the fourth quarter of 2025. Meanwhile, Advantage+, the company’s automated advertising platform that uses AI for ad creation and targeting, reportedly crossed a $60 billion annual run rate.
Another product, called Incremental Attribution, aims to improve how advertisers measure conversions. The system reportedly delivered a 24% increase in conversions compared with Meta’s standard attribution model and reached a multi-billion-dollar annual revenue run rate within months of its launch.
Investors remain divided on valuation
Regardless of strong growth and growing evidence that AI is boosting its advertising business, Meta continues to trade at a lower valuation than several major technology peers.
The company’s forward price-to-earnings ratio is currently around 18 times, below its historical average and lower than many other members of the so-called Magnificent Seven group.
Supporters argue that Meta already has a highly profitable advertising business and that AI is making that business even more efficient and valuable. Critics, however, continue to question whether the company’s massive AI-related spending can keep generating returns large enough to justify future investments.