Cathie Wood Just Poured $18 Million Into Meta Stock. Here’s Why.
Cathie Wood, the founder of ARK Invest, has a reputation for adding stocks to her portfolio when others hesitate. Besides Apple (AAPL), shares of all other Magnificent Seven stocks are down so far this year. Wood took this opportunity to add $18 million worth of Meta Platforms (META) shares ahead of the company’s July 29 earnings…
Cathie Wood, the founder of ARK Invest, has a reputation for adding stocks to her portfolio when others hesitate. Besides Apple (AAPL), shares of all other Magnificent Seven stocks are down so far this year. Wood took this opportunity to add $18 million worth of Meta Platforms (META) shares ahead of the company’s July 29 earnings report. Despite Meta remaining one of the biggest beneficiaries of the AI boom, its stock is still down about 8% year-to-date (YTD) and 21% below its 52-week high, also trailing the tech-heavy Nasdaq Composite ($NASX). For Wood, however, the recent pullback appeared as an opportunity to load up on a rapidly growing AI stock. Here’s why.
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Wood Sees a Core Business That Keeps Getting Stronger
While the market is only focused on how AI capex spending is rising, it has gone unnoticed that Meta’s underlying business remains strong. It is one of the main reasons Wood chose to add 28,106 Meta shares worth roughly around $18.16 million to ARK Invest, despite the stock dip. Currently, Meta holds a 7.8% total weight across various ARK Invest Funds. Meta’s advertising business is boosting its Family of Apps segment, which consists of all of its social media platforms. FoA business revenue reached $55.9 billion, up 33% year-over-year (YoY), while operating income also rose 24% to $26.9 billion in the first quarter. Ad revenue alone contributed $55 billion. Total revenue increased 33% YoY to $56.3 billion.
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But Meta just didn’t show ads. It served 19% more ad impressions across its platforms while simultaneously increasing the average price per advertisement by 12%. Management stated that stronger engagement across its apps, improved advertiser performance, and healthier macroeconomic conditions all contributed to the pricing strength. AI is improving the company’s advertising business, which investors might have overlooked. Instagram and Facebook saw one of their strongest engagement improvements in years, with total video watch time climbing more than 8% globally and reels time spent by 10%. Management credited this to meaningful improvements in how its AI systems understand both users and content. The top-line growth even translated to improved profitability. Earnings increased 62% to $10.44 per share.
AI Spending Is Rising, but Meta Has the Balance Sheet to Support It
Meta is building leading AI models that require massive investments in computing infrastructure, and management isn’t backing away from that commitment. In Q1, the company spent $19.8 billion on capital expenditures, driven largely by investments in servers, data centers, and networking infrastructure. The company has now increased its capital expenditure forecast to $125 billion to $145 billion for 2026.
CEO Mark Zuckerberg stated that higher memory costs are pushing infrastructure spending higher. However, he believes that these investments will help Meta become the industry’s most efficient company at building AI compute, and that efficiency will eventually become a competitive advantage. Another reason that may have compelled Wood to choose Meta now is the company’s growing control over its AI infrastructure. According to a Reuters report earlier this month, Meta expects to begin manufacturing its custom Iris AI chip in September and plans to double its computing capacity to 14 gigawatts by 2027. This initiative will require enormous upfront investment, which might make short-term investors skeptical. However, developing custom AI chips will eventually reduce its reliance on third-party suppliers like Nvidia (NVDA), lowering AI computing costs and increasing profit margins in the long run.
Despite the heavy investments, Meta’s strong cash flow generation capacity and a sturdy balance sheet act as a safety cushion for now. The company generated more than $12 billion in free cash flow in Q1, holding $81.2 billion in cash and marketable securities.
What Investors Will Be Watching on July 29
Wood’s latest addition of META stock to her portfolio suggests that she believes the market is focusing more on the near-term spending while neglecting the strength of the company’s underlying business. Meta expects second quarter revenue between $58 billion and $61 billion, an increase of roughly 25% YoY. The company also expects operating income to exceed 2025 levels despite the sharp increase in AI investment, showing confidence that its core business can continue funding its ambitious AI strategy.
Investors will want to see if advertising demand remains as healthy as it was in Q1. Furthermore, investors will want reassurance that these investments are translating into better products, stronger monetization, and sustainable long-term returns. The upcoming earnings will reveal whether Meta’s strong fundamentals finally outweigh investor concerns over rising AI spending.
Overall, on Wall Street, META stock remains a “Strong Buy.” Among the 54 analysts covering the company, 44 give it a “Strong Buy” rating, two recommend a “Moderate Buy,” and eight suggest holding. The average price target of $824.29 indicates potential 36% upside from current levels. Meanwhile, the high price target of $1,015 implies the stock could surge by as much as 67% over the next year.
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On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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