How Donald Trump is Fueling META's AI Push
Elevate Your Investing Strategy:
Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Donald Trump's sweeping legislation is set to expand corporate cost savings, effectively de-risking Meta's robust capital expenditures in ventures like artificial intelligence (AI) and the metaverse. Moreover, the savings enable Meta to simultaneously meet investor demands for immediate capital returns via dividends and share repurchase authorizations. The ultimate result of META's innovations, as well as some corporate fast-tracking, have led to an almighty stock rally pushing META stock up by 353% in three years.
With a solid foundation in ad revenue and increasingly favorable tax provisions, Meta is poised to secure a large chunk in the global AI arms race. This makes me stoutly Bullish on META.
Trump's Multi-Billion-Dollar Tax Boost
Taxes may not be everyone's favorite topic, but not so for META investors. Helped by significant tax breaks enacted over the past decade, the U.S. startup has bloomed into a global tech giant. Back in 2017, the TCJA included corporate provisions that reduced the federal corporate income tax rate from 35% to 21%, significantly reducing Meta's effective tax rate, or ETR, which also accounts for other tax provisions.
For instance, in 2016, Meta's ETR was ~18.5%. The TCJA enactment lowered its ETR to 13% in 2018, saving Meta billions of dollars that supplement Meta's bottom line.
In 2025, Meta expects this rate to range between 12% and 15%. Considering that Meta generates ~$70 billion in annual income before taxes, savings add up quickly. Meta expects that recent legislation will continue to reduce its ETR for the 'remainder of the current year and future years.'
While the corporate income tax rate reduction was a permanent feature of TCJA, the One Big Beautiful Bill Act gives mega corporations like Meta even more benefits.
Signed into law on Independence Day, the One Big Beautiful Bill Act now allows businesses to immediately deduct a larger portion of capital expenditures, such as equipment and machinery purchases—up to 40% in the first year—instead of depreciating those assets over time. For Meta, which plans to invest $66–72 billion in infrastructure like data centers, servers, and networks, this change offers meaningful short-term tax benefits and encourages continued investment. The law also introduces a similar accelerated deduction structure for domestic research and development expenses.
Fueling the AI Arms Race and Rewarding Shareholders
Meta's ability to create free cash flow (operating cash flows less capital expenditures) is paramount in the two-front war it is fighting. The company is pursuing an unprecedented investment campaign in AI infrastructure and executing a robust capital return program.
Meta's capital expenditures have skyrocketed from just under $14 billion in 2018 to a guided range of $66 billion to $72 billion for 2025. The spending is aimed at building out the data centers, acquiring the servers, and securing advanced chips from suppliers like Nvidia (NVDA) to develop and deploy generative AI models, which could feasibly spur a revenue opportunity one day that exceeds its current ad revenues.
Simultaneously, Meta must be mindful of its investors amid its shopping spree. In this vein, the company is returning billions to investors via its $50 billion capital return program. Programs like these lower the outstanding share count and give investors a larger piece of the pie.
Justifying META's Premium Valuation
The combination of $46 billion-plus in reliable and high-margin advertising revenue per year, massive investments to spur growth in other markets like AI, and a commitment to capital returns makes META a very attractive stock for a variety of investors.
Key areas of investment include AI development, as Meta established Meta Superintelligence Labs and is advancing towards Llama 4.1 and 4.2 models. The augmented reality space also saw growth, with increased sales of Ray-Ban Meta glasses contributing to the Reality Labs revenue of $370 million.
In my view, it justifies META's premium valuation, which features a Price-to-Earnings (P/E) ratio of 27.2 versus a sector median of 20.38.
Is META a Buy, Hold, or Sell?
On Wall Street, Meta sports a Strong Buy consensus rating based on 42 Buy, five Hold, and zero Sell ratings in the past three months. META's average stock price target of $872.50 implies upside potential of 13% over the next 12 months.
Earlier this week, analyst Paul Chew from Phillip Securities assigned a Buy rating to META stock with an accompanying 12-month price target of $830. He is optimistic about Meta's advertising capabilities, noting 'The company's advertising business has shown robust growth, with a 21% year-over-year increase in revenue, driven by improved ad performance and higher user engagement. This growth is supported by Meta's investment in AI, which has enhanced ad conversion rates and increased the average price per ad by 9% year-over-year.'
Meta's Bull Run Puts $1,000 Price Target Within Reach
Meta's advertising business, now increasingly driven by AI, is performing at its peak. Supportive legislation from a business-friendly President continues to favor Big Tech, carrying significant financial implications for the company. Moreover, strong free cash flow gives Meta a durable, long-term competitive edge. Notably, while the company is making substantial investments, it still shows consideration for shareholder interests—even as its growth initiatives may take time to yield financial returns.
However, key risks remain. Favorable legislation benefits not just Meta but also major competitors like Google (GOOGL), OpenAI, and Microsoft (MSFT). Meta still faces scrutiny around antitrust, data privacy, and content moderation. The long-term viability of its heavy investments in AI and the metaverse—particularly through Reality Labs, which has posted consistent losses—is still uncertain. And with advertising as its primary revenue stream, Meta remains vulnerable to macroeconomic fluctuations.
Despite what the naysayers claim, META stock is in a bullish mood with the $1,000 per share milestone now in sight within the next three years, assuming META's execution stays on trend while not fumbling its AI projects. Considering the history of strong execution, I don't see why META can't continue on its upward track for a while yet.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Miami Herald
19 minutes ago
- Miami Herald
Analyst expects gold to fall off the 'Wall of Worry'
Investors have been climbing the proverbial wall of worry to new record highs on the stock market this year, fearful with each step that the market is about to have a reversal. Meanwhile, gold's move to record highs has been far more impressive, and buyers seem to have no worry that the end of their rally is in sight. Stocks, as measured by the Standard & Poor's 500, were up roughly 9.4% through August 8 – though they were up nearly 28% since the market bottom on April 9, the day when President Donald Trump paused tariffs just days after announcing them. Don't miss the move: Subscribe to TheStreet's free daily newsletter Meanwhile, gold has soared by 29.5% this year, through August 8, standing at roughly $3,460 an ounce. Its gain since the post-tariff announcement low is roughly 18%, but gold also didn't suffer as much as stocks in the meltdown that accompanied the tariff news. The three-year annualized average return on gold, as measured by SPDR Gold Shares (GLD) , is 23.4%, well above its historic averages; from 1971 to 2024, the annualized return on the shiny stuff was just under 8%. Gold's rise hasn't been as a result of its traditional role as a hedge against inflation, because it normally takes a protracted time period with prices rising by more than 5% for gold to kick in that way. Instead, gold has been seen as an ideal hedge against geopolitical risk, the fighting in Ukraine and Gaza, the prospect of trade wars coming from the tariffs, and more. With no end in sight to those problems, plenty of investors have become gold bugs, looking to precious metals for protection and profits in times of uncertainty. More investing: Analyst says popular meme stock is worth less than zeroVeteran fund manager turns heads with Palantir stock price targetTop analyst sends Apple CEO bold message about its future And while buying gold now – or stocks, for that matter – can feel a bit like showing up late to the party, most industry watchers are suggesting that full-steam ahead is more likely than some reversion to the mean. While there is no shortage of caution and nervousness, there is no widespread call for recession even into 2025. Plenty of market observers saying that rate cuts (whenever they start) and the economic benefits of deregulation – the next big component of President Trump's economic plan – will offset the headwinds to keep things moving forward, albeit moderately. And plenty of gold analysts make a case for the gold rally to continue. "This gold bull market might be a little bit old in the tooth … it started in 2016," said Thomas Winmill, manager of the Midas Discovery Fund (MIDSX) , in an interview on the August 4 edition of "Money Life with Chuck Jaffe." "It's up over 300% in those nine years. That has not happened very often. The average bull market for gold is about 53 months, according to my research, and this is over 110, almost twice the normal length." Related: Veteran strategist unveils updated gold price forecast Still, Winmill insisted gold is not overpriced: "If you adjust the former high, which was reached back in 1988, for inflation, we're actually below that high, which inflation-adjusted would be about $3,500 an ounce." "The basket of gold stocks represented by the Gold Bugs Index hit a high of 600 in August of 2011 when the gold price hit 1800," Winmill added, "and that index is well below that now, in the 400 range, about 430. So, on that score, we've got 50% to go in gold stocks." On the other side of that trade is veteran commodities and futures analyst Carley Garner, senior strategist at DeCarley Trading, who said in an interview from the August 5 edition of "Money Life" that it's a "sell-the-rallies market in both gold and silver, and the reason I think that is I believe the U.S. dollar has bottomed, and I think it will continue to work its way higher." Garner said that move in the dollar changes the landscape for a lot of commodities, but particularly the metals, and especially in times when gold "is probably the most volatile it's ever been." It's not the volatility that concerns Garner so much as the price, especially because, she said, "A lot of people are putting money in gold just because it's going up." "But I've lived through 2011," she added, "and I remember all of the same stories that are circulating in gold, all the reasons to buy it. 'The central banks are buying this and that. You can't trust the dollar,' so on and so forth. "All of those things were narratives in 2011, and gold topped, and then took a 50% haircut, and it took a decade to get back." Garner added that a 50% haircut is not just a possible scenario, but also "might actually be what could be around the corner." Garner noted that she isn't trying to predict anything, but rather is reading the probabilities. While her take on gold is sour, her take on the stock market isn't much better, with a probability of being much lower than current levels before it can trade significantly above them. She noted a trend line in the monthly chart of the S&P 500 futures, looking at high points, that "comes in right around 6,000 [on the S&P index]. So can we go above 6500? Sure. But the odds that we see higher than that here in the next handful of months, are pretty slim. A more likely scenario is we get continuation of the consolidation or the pullback. But the problem is, I don't see any good support on a monthly chart until we get into the low 5000s." In her personal portfolio, Garner noted that she is heavily overweight Treasury securities. She has used this strategy before to ride out rough patches until the market made her more optimistic. "Treasuries, regardless of where you look at the curve, are paying 4% to 5%," Garner said. "And if you hold expiration, you get that money.…So I'm just playing the odds here. And the odds are Treasuries are [a] much better buy than stocks." Related: Legendary Wall Street forecaster Bob Doll is having his best year The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Fox News
43 minutes ago
- Fox News
Trump border wall materials sold by Biden may soon find their way back to the feds, auctioneer claims
FIRST ON FOX: The global government-surplus auction house that listed unused components of President Donald Trump's border wall under the Biden administration told Fox News Digital on Friday that it plans to coordinate with the Trump administration to return some of the materials to the federal government. In January 2021, President Joe Biden set in motion the chain of events that would eventually lead to the sale of unconstructed border wall components and implements. "Like every nation, the United States has a right and a duty to secure its borders and protect its people against threats. But building a massive wall that spans the entire southern border is not a serious policy solution," Biden said in an executive order halting construction. Until Friday, the ultimate fate of the unused border wall materials – originally estimated to be worth between $260 million and $350 million – remained largely unclear. A contentious court battle in Texas last December resulted in a 30-day freeze on the auctions, but little has publicly transpired since. In a statement to Fox News Digital, GovPlanet – an auction clearinghouse for public-sector and government surplus – announced Friday they have reached a breakthrough deal with the Trump administration. "GovPlanet has reached an agreement, working with the Office of the Border Czar, to return border wall materials that were previously deemed surplus and sourced by the federal government to GovPlanet via existing contracts," said the company, a subsidiary of an Illinois-founded, British Columbia-based international operation called Ritchie Brothers Auctioneers-RB Global. "A third-party firm that has been contracted for construction of the border wall will take receipt of the materials over the next 90 days," GovPlanet added. GovPlanet officials said they were pleased to work with the administration to return the materials "at-cost" to the feds and "protect the millions of dollars that U.S. taxpayers had already invested in this initiative." "We are expediting the transfer of these materials to support the administration's border protection plans. We value our longstanding partnership with the U.S. government and look forward to continuing to support America's federal agencies." Asked about the claim from the auction house, a White House official told Fox News Digital the Trump administration is "grateful for all third parties who are interested in helping keep America's borders safe and secure." After Biden's order freezing construction, which ultimately led to the erstwhile auctions, Sens. Deb Fischer, R-Neb., and Joni Ernst, R-Iowa, said taxpayer money was being spent by the Pentagon to guard the materials as they languished in the New Mexico desert. A 2023 release from Fischer cited a $130,000-per-day figure for the storage and security of the panels in New Mexico and Arizona. A provision in the annual 2024 National Defense Authorization Act (NDAA) required the Pentagon to submit a plan for transfer or sale of the materials. About 60% of the border wall components were transferred to southwestern states like Texas and California as well as U.S. Customs and Border Protection. Texas Lt. Gov. Dan Patrick told Fox News at the time that Texas purchased about $12 million from an auction. Tens of thousands of bollards, panels and components, including structural tubing, were later put up for auction on GovPlanet. Dozens of lots of materials were listed for auction by August 2023, according to the New York Post. The paper cited a $154,200 payday for 729 "hollow beams," in one example. Screenshots on ABC-15 Phoenix's website showed 33-foot by 8-foot steel wall panels being sold for $1 apiece in sets of five. Ernst lambasted the administration upon the news, saying that materials purchased with hard-earned taxpayer funds were being sold for "pennies on the dollar." By that time, a total of $498,000 had been paid for the overall materials, according to Newsweek. The outlet cited the U.S. Army Corps of Engineers in confirming the implements were being marketed in accordance with federal acquisition regulations. But, the trail began to go cold after that hot summer, as Lt. Gov. Patrick informed Hearst Newspapers in December he had been told that any further sales would be frozen until after Trump's second inauguration. Texas Land Commissioner Dawn Buckingham argued in court that the Biden administration was ignoring prior court orders by selling off the components, according to the Houston Chronicle. GovPlanet appeared to de-list the items around that time. In a Dec. 27 ruling, Texas federal Judge Drew Tipton barred the selling of wall materials for 30 days, according to Law & Crime. The outlet added, citing Texas Attorney General Ken Paxton, that Tipton further asked the Biden administration to explain whether it violated a prior ruling in Texas' favor that required certain funds be spent on border wall construction. Texas had claimed Biden's auctions were netting buyers wall components at a rate that would have added up to about a half-mile per day, if constructed as Trump originally intended. There appeared to have been little movement on the sales since the 30-day moratorium expired in January, until Fox News Digital contacted GovPlanet on Friday. Several reports said the federal government no longer owns the border wall components the Biden administration set for auction, and that GovPlanet/RBGlobal legally possesses them. Art del Cueto, a Border Patrol union official, told ABC-15 that the stock cited in reports on the sales could "pretty much be utilized." "They could put down footing, pick it back up and use it," he said. "When you have to start with the new administration, wanting to rebuild it, what are we going to have to do, you're going to have to use more taxpayer-funded money, which is insane to me," del Cueto added. Fox News Digital reached out to Patrick's office and DHS for comment.
Business Insider
an hour ago
- Business Insider
The Week That Was, The Week Ahead: Macro & Markets, August 10, 2025
Everything to Know about Macro and Markets Stocks rebounded on Friday, closing the week firmly in the green – the market's third winning week out of the last four. The S&P 500 (SPX) rallied for its strongest week since late June, closing on the brink of a record after gaining 2.43%. The Dow Jones Industrial Average (DJIA) finished the week up 1.35%. Meanwhile, the Nasdaq-100 (NDX) surged by 3.73%, reaching a new record. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. The Land of the Buoyant Technology and Consumer Discretionary sectors led the charge, while healthcare lagged amid tariff and clinical-trial headwinds. Tech stocks pulled major investor inflows, especially into semiconductor and AI-related names. After the prior week's pull‑back, investors bought the dip again, demonstrating conviction in the rally's viability – grounded in solid fundamentals. Around 90% of S&P 500 companies have reported Q2 earnings, with 81% beating expectations – the best since Q3 2023. In tech, more than 90% have exceeded forecasts. These strong results have prompted analysts to lift Q3 earnings expectations, particularly for Energy, Communication Services, Technology, and Financials. Despite ongoing tariff-related and broader macro uncertainties, the U.S. corporate sector remains resilient – with expectations that this strength will persist, assuming the economy holds. Companies' managements and boards are reflecting that confidence through share repurchases. In July alone, U.S. companies announced a record $166 billion in stock buybacks – the highest for any July on record, and year-to-date repurchases now total nearly $926 billion, exceeding the previous record. Additionally, IPO activity is robust – as of August 5, 2025, there have been 202 IPOs in the U.S., up 80% over the same period last year. This resurgence is widely seen as driven by growth and profitability – quite distinct from the speculative SPAC wave in 2021. The divergence between Wall Street and Main Street sentiment is narrowing – both appear to be looking past the dire headlines on tariffs, economic, and geopolitical risks. New business creation in the U.S. has surged since November, with July business applications hitting their highest levels since late 2007. …and the Resilient President Donald Trump claimed tariffs were 'having a huge positive impact on the stock market,' adding that 'hundreds of billions of dollars are pouring into our country's coffers,' supporting the economy and equities. Whether tariffs deserve credit is debatable – but the fear factor seems much less than expected. The average effective U.S. tariff rate is at its highest level since the Great Depression – yet today's economy and corporate sector are far more advanced and adaptive. Tariffs have already nudged prices upward, and a short-term inflation bump is expected throughout this year and next. Still, the U.S. economy – dynamic and resilient – is adjusting. Companies are shifting supply chains, and because tariffs were announced ahead of time, they had ample time to prepare. Some sectors may even benefit from increased domestic investment and reshoring. On the household front, while tariffs could dent purchasing power via higher prices, the impact should be limited and temporary, not a sustained driver of inflation. Future trade agreements are expected to ease tensions and help contain inflation and growth risks. Last week's rally underscores U.S. resilience – stocks advanced even as Trump's tariff rollout accelerated. In fact, some signs of economic softness may have aided the rally, by heightening odds of a 0.25% rate cut in September. With valuations rich but still not technically overbought, a rate cut could inject fresh momentum heading into the Q3 earnings season. Nevertheless, analysts broadly agree that the path ahead may remain choppy, with trade, macro, and geopolitical developments likely to test investor resolve. Stocks That Made the News ▣ Stocks heavily exposed to higher tariffs – including Lululemon (LULU), Nike (NKE), Caterpillar (CAT) – ended the week deep in the red as tariffs took effect. Caterpillar (CAT) warned of up to $1.5 billion in tariff-related costs for the year, with $400-500 million expected in Q3 alone, and its shares slipped on profit-miss news. Caterpillar's tariff exposure made it one of the week's weakest performers in industrials. Meanwhile, several stocks – including Kroger (KR), Monster Beverage (MNST), Cummins (CMI), Fastenal (FAST), Bank of New York Mellon (BK) – closed at all-time highs. ▣ The newly proposed 100% tariffs on semiconductors didn't become a drag, as exemptions were broader than expected and included firms with U.S. production. Apple (AAPL) had its best week since 2020 amid optimism that its plan to spend about $600 billion over four years on U.S. manufacturing would help it avoid tariffs. ▣ Taiwan Semiconductor Manufacturing (TSM) reported a ~26% YoY revenue surge in July, driven by accelerating AI demand. In response, it raised its 2025 U.S.-dollar sales growth forecast to around 30%. TSMC was exempted from the proposed 100% U.S. tariff due to its extensive U.S. investments, including a $165 billion commitment for plants in Arizona. ▣ Tesla (TSLA) investors cheered the dismantling of its Dojo supercomputer team, sending the stock nearly 7% higher for the week as the company shifted focus to upcoming AI5 and AI6 chip architectures and leaned on external compute partners like Nvidia (NVDA) and AMD (AMD). ▣ Palantir Technologies (PLTR) surged almost 17% for the week, taking its year-to-date gain to 147% and hitting a new record after the earnings report appeared to meet the Street's elevated expectations for Q2. ▣ The Healthcare sector saw mixed action. Gilead Sciences (GILD) climbed over 5% following strong Q2 results and raised 2025 sales and EPS guidance, buoyed by a promising new HIV-prevention drug launch. Meanwhile, Eli Lilly (LLY) suffered its worst day in 25 years, tumbling over 18% for the week as obesity-pill trial data disappointed investors despite solid earnings and guidance. ▣ The Trade Desk (TTD) was the S&P 500's worst performer, plunging over 38% following its earnings report. Despite strong results, the stock was slammed with downgrades after CEO Jeff Green warned of tariff and inflation pressures. This marks its second 30%-plus drop on earnings this year, following a 33% plunge in February. Upcoming Earnings and Dividend Announcements The Q2 2025 earnings season is winding down, but several notable releases are still scheduled for this week. These include: AST SpaceMobile (ASTS), Oklo (OKLO), (MNDY), CoreWeave (CRWV), Cisco Systems (CSCO), Applied Materials (AMAT), Deere (DE), and Ross Stores (ROST).
