Six weeks ago, investors were openly questioning whether Meta Platforms‘ enormous spending on artificial intelligence would deliver a clear return to shareholders.
Meta shares climbed 21% through mid-July, adding roughly $270 billion in market capitalization, Motley Fool reported.
That rally pushed CEO Mark Zuckerberg‘s estimated net worth to $222.1 billion and made him the fifth-richest person on Earth, according to Forbes’ real-time billionaires list.
He leapfrogged Michael Dell, whose fortune slipped to $221.1 billion as Dell Technologies shares declined more than 18% from a June high, Forbes reported.
Zuckerberg now trails Elon Musk, Larry Page, Sergey Brin, and Jeff Bezos, each tied to a company with a significant stake in the AI buildout.
Meta’s cloud computing pivot reversed a punishing June decline
Meta stock dropped 11% in June, ranking it among the S&P 500‘s weakest performers, as investors grew frustrated with the company’s unclear AI payoff.
The turnaround began on July 1, when Bloomberg reported that Meta was building a cloud business to sell excess AI computing power to outside customers.
Shares surged 8.8% on that single trading day, marking the stock’s sharpest daily gain in months, and the rally continued through mid-July, Motley Fool reported.
Zuckerberg later confirmed the company was considering leasing some of its AI infrastructure to external developers facing a shortage of computing capacity.
At Meta’s annual shareholder meeting on May 27, Zuckerberg described the volume of inbound demand the company is fielding from outside businesses seeking access to its AI computing resources, according to CNBC.
Almost every week there are different companies that come to us from outside asking us to both stand up an API service or asking if we have compute that they could buy from us at some premium to what we’ve bought it at.
Mark Mahaney, head of internet research at Evercore ISI, noted that Meta would likely compete with neocloud companies such as CoreWeave and Nebius, rather than directly challenge Amazon or Microsoft, CNBC confirmed.
Meta’s Iris chip offers a second path to reducing AI costs
The second catalyst arrived when an internal company memo showed Meta plans to begin manufacturing a custom artificial intelligence chip in September, Reuters reported.
The chip, code-named “Iris,” is the fourth generation of Meta’s in-house Meta Training and Inference Accelerators program, designed with Broadcom and manufactured by Taiwan Semiconductor Manufacturing Co. (TSMC).
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Iris cleared its testing phase in approximately six weeks without any major issues, the internal memo showed, marking brisk progress for the program.
The chip is designed to supplement rather than replace the Nvidia and AMD graphics processors that Meta already buys in massive quantities.
Meta’s infrastructure plan targets 7 gigawatts of computing capacity by year’s end, with a goal of reaching 14 gigawatts by the end of 2027.
The company has committed to a 1-gigawatt deployment of custom chips through its Broadcom partnership, an agreement that extends through 2029, Reuters noted.
Meta’s first quarter results show the ad engine still powers the company
The AI spending debate overshadows an advertising business that continues to post record revenue and strong profit margins for shareholders each quarter.
Meta reported first quarter 2026 revenue of $56.3 billion, a 33% increase from the same period a year earlier, the company’s earnings release showed.
Growth was driven by a 19% increase in ad impressions across Meta’s platforms and a 12% rise in the average price advertisers paid per ad.
Operating income reached $22.9 billion with a 41% margin, and the company ended the quarter holding $81.2 billion in cash and marketable securities.
Free cash flow came in at $12.4 billion, lagging the $26.8 billion in net income by a wide gap because of the heavy infrastructure spending.
That gap between reported profit and actual cash generation is what has kept some Wall Street analysts cautious, despite the strong operating performance.
How Wall Street is sizing up Meta stock after the July rebound
Trading at about 24 times trailing earnings, Meta is no longer cheap by conventional valuation standards, but several Wall Street firms believe it remains undervalued.
Bank of America analyst Justin Post has maintained a buy rating on the stock with an $835 price target, according to Stock Analysis.
Mahaney at Evercore ISI carries an outperform rating and a $930 price target, pointing to advertising strength and emerging AI monetization, his June 17 rating indicated.
The central unresolved question is whether Meta can shift its AI infrastructure from a pure cost center into a business that generates meaningful revenue.
Analysts including Mahaney at Evercore ISI have pointed to the reversal as evidence that sentiment can shift quickly once monetization pathways emerge.
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