The latest AI move from Meta could make its biggest business even stronger
The grip Meta Platforms has on digital advertising is only getting stronger. Meta is making a change to its recommendation engine. Starting Dec. 16, conversations users are having with the company’s generative artificial intelligence tools — such as chatbots within Facebook, Instagram, WhatsApp, and Messenger, as well as the standalone Meta AI app and website — will be used to make ads and content more personal. While users cannot opt out, Meta said the “update won’t apply” to those who do not interact with AI on its platforms. The company also said AI conversations involving health, politics, and religion will be excluded. D.A. Davidson tech analyst Gil Luria called the update: “The next leg of Meta continuing to be the biggest share gainer in advertising,” since 2007 when the company established its full ad platform. By feeding insights from Meta AI — which answers questions and generates text and images, into its recommendation systems — the company aims to better understand what its more than one billion people who use the chatbot every month care about beyond their likes, follows, posts, and replies. The social media giant hopes this sharper use of AI will supercharge its powerful ad engine that already makes the company one of the most dominant forces in digital advertising. Data from eMarketer , which tracks the online advertising business, puts Meta second, estimating it will capture nearly 21% of U.S. digital ad spending in 2026. Alphabet ‘s Google was first at almost 24%, with Amazon seen as a steadily rising No. 3 at more than 17%. “The ability now to add what they [Meta] learn about their consumers from the chat will make their ads even better,” Luria told CNBC. “There are a lot of things we ask a chatbot that are beyond the social media feed.” He added, “This gives Meta incredibly valuable information for refining and feeding into the flywheel of delivering better, more relevant content and then delivering better, more relevant ads.” Luria said that Meta’s expansion of data collection plays directly to the company’s strengths: keeping consumers engaged and delivering the most relevant ads. “The more Meta knows about its consumers, the better targeted the ads. If the ads are very well targeted, then the return the advertiser gets continues to increase,” according to Luria, who has a buy rating on the stock, with a $825 price target, implying 15% upside to Wednesday’s close. The intense artificial intelligence push at Meta — which CEO Mark Zuckerberg aimed to accelerate with an AI hiring blitz this summer — has long fueled the company’s ad dominance. Even before last week’s update, Meta used AI to decide what content users see and which ads to serve based on their interests and behavior. Meta has also been using AI to help companies create and target their ads. Luria explained that by weaving AI deeper into its core platforms, Meta is proving how its multi-billion-dollar investment in building out AI can boost the precision and profitability of its ad business, which also funds its efforts in virtual reality goggles and smart glasses. Those initiatives are housed in the money-losing Reality Labs part of Meta. “Meta isn’t just investing in AI infrastructure just to serve better ads,” Luria said. “They want to have the best model,” referring to rival AI models from the likes of OpenAI’s ChatGPT, Google’s Gemini, and Perplexity’s Claude . “But in the meantime, to pay for that, they’re going to sell more ads, which helps pay for the infrastructure,” he added. To be sure, investors have raised concerns about the high cost of Meta’s AI buildout – including spending on data centers and custom chips – and whether those investments will deliver enough return. The debate comes as some investors worry about a potential bubble forming around the AI trade, raising questions about how much growth is already priced into AI-driven stocks. Since posting a record-high close of $790 on Aug. 12, the stock has cooled off. Shares currently trade at around $716 each — up 22% year-to-date versus the S & P 500 ‘s 14.5% advance in 2025. META YTD mountain Meta Platforms YTD In his most recent Sunday column, Jim Cramer wrote , “We are living in the fourth industrial revolution. It is based on artificial intelligence that will carve up whole verticals.” For Meta, that means using its massive cash flow and AI expertise to maintain its leadership in digital advertising. The Club continues to maintain our $825 price target on Meta stock and 2-rating , meaning we would wait for a pullback before buying. (Jim Cramer’s Charitable Trust is long META, AMZN, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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