Meta Platforms’ stock META has been caught between enthusiasm over its artificial intelligence ambitions and concerns about the enormous cost of funding those efforts.
The latest rebound is giving bulls fresh reason to believe the company could finally be approaching a sustained breakout, Bloomberg reported, although analysts remain divided over whether the rally can last.
Meta shares have risen 22% from their August low and are on track for their strongest monthly gain since May 2025.
The recovery accelerated after the company settled a major social-media lawsuit and introduced Muse, an AI agent designed to automate everyday tasks for consumers.
The developments have helped revive the investment case for Meta after a year of repeated rallies that ultimately failed to hold.
Meta stock has already experienced four trough-to-peak gains of at least 20% in 2026.
Each rally subsequently faded, with the stock recording lower highs along the way.
That has left the shares essentially flat for the year, compared with a roughly 15% gain for the Nasdaq 100.
Meta was up about 1.4% today, touching $675.
Bulls see catalysts for a breakout
Investors betting on a sustained recovery believe the latest combination of legal relief and AI product momentum could be different.
“Eliminating a legal overhang and then having a positive product in a hot narrative is certainly enough to get the early stages of a trend change going,” Dan Russo, co-chief investment officer at Potomac Fund Management, which owns Meta shares, said in the Bloomberg report.
“We’ve seen a number of these counter-trend rallies fizzle out and fade. What’s key from here is to build on the momentum and validate the changing trend.”
For Russo, that validation would require Meta stock to break decisively above $700 and remain there.
The $18 billion settlement of Meta’s social-media lawsuit has also removed a significant source of uncertainty.
The company had previously calculated that an adverse trial outcome could have exposed it to penalties of as much as $1.4 trillion.
Meta shares have fallen in only four of the 12 trading sessions since the settlement was announced on Aug. 26.
AI products strengthen the investment case
The legal resolution has arrived alongside renewed optimism about Meta’s AI ambitions.
Morgan Stanley analyst Brian Nowak compared Meta’s current setup with Alphabet’s position in late 2025, when the Google parent received a favourable ruling in a long-running antitrust case and subsequently launched a series of AI products.
Alphabet shares have since gained more than 50%, becoming the best-performing Magnificent Seven stock over that period.
Nowak believes Meta could similarly benefit as it continues to roll out AI products.
Meta is in position to keep releasing new products, “which in aggregate could add $10+ to EPS,” Nowak wrote in an Aug. 30 note.
“We don’t believe these are priced in Meta right now,” he added, arguing that the stock is trading below its valuation peak in 2025, when investors viewed Meta as an “AI winner” and GPU investments were helping drive faster growth.
JPMorgan has also become more positive, upgrading Meta to overweight last week.
Analyst Doug Anmuth cited “strong early traction” for Muse and said the product demonstrated why Meta could have an advantage in bringing consumer-focused AI products to its enormous user base.
“Meta is well-positioned to deliver consumer-driven AI products to its base of about 4B users,” Anmuth said.
“There’s still meaningful upside potential as Meta is in the early stages of releasing frontier models and AI-driven products beyond advertising,” he added.
Cheap valuation comes with a big spending risk
Meta’s valuation could provide another reason for investors to consider the stock after its recent weakness.
The company trades at roughly 18 times estimated earnings for the next 12 months, below its 10-year average of about 20 times and more than 30% below its 2025 peak.
At the same time, analysts expect revenue to grow by more than 25% this year, while earnings are forecast to increase by more than 30%.
But the stock’s relatively inexpensive valuation also reflects concerns about the enormous investment required to compete in AI.
Meta’s capital expenditure is expected to nearly double to about $140 billion this year and rise to almost $200 billion in 2027.
That spending is expected to put substantial pressure on free cash flow.
After previously generating significant cash flows, Meta is projected to post negative free cash flow of about $6.3 billion this year, with the deficit potentially widening to almost $30 billion in 2027.
Investors remain divided over the rally
Those spending requirements are keeping some investors from fully embracing Meta’s recovery.
Cyrus Amini, chief investment officer at Hyphen Wealth Management, said the stock’s valuation and near-term catalysts were attractive, but questioned whether those factors were enough to support a longer-term rally.
“The valuation is attractive, and it could have more short-term catalysts than megacaps, but for anything beyond that, all bets are off. It could easily fade again,” he said in the Bloomberg report.
“Things are changing so fast it’s hard to safely say any name is a long-term winner.”
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