Meta is breaking out after introducing Muse AI agent. Where the stock is going, according to the charts
Meta’s new personal AI agent, Muse, hit the No.1 spot on Apple’s App Store this week, and the stock responded the way you’d expect when a market finally gets the answer it’s been waiting on all year. Shares jumped 11% to close at $741.25, the biggest one-day move since April 2025, on roughly 48 million shares, several times normal volume. That’s institutional money repositioning, not a retail pop. Meta is now up more than 20% since Muse launched on Sept. 8. Muse could be a game-changer for every casual-user of AI who doesn’t want to learn connectors, skills and complicated plugins (like my wife). It could connect her to her email, calendar, payment apps — and it actually does things. It books travel, fills out the form, shops, and hunts down a cheaper insurance policy. Meta launched it with a free tier, plus $20 and $100 monthly plans. It’s available through an app, the web and WhatsApp. The last one is the distribution advantage nobody else has, but the subscriptions aren’t the real story. CEO Mark Zuckerberg laid out the economics on the Sources podcast: “We think that this thing is actually going to make you money and save you money, and that is how it’s going to pay for itself.” He’s talked about eventually taking “a very small cut of whatever the transaction is”, and the business owners can plug Muse directly into Meta’s ad systems. That’s a toll booth on commerce, not a paywall, and Meta already serves hundreds of millions of small businesses. Wall Street is coming around. Wells Fargo’s Ken Gawrelski took his target to $796 from $640 on Monday, saying Meta “now has a story to tell.” Mizuho’s Lloyd Walmsley called the launch a meaningful step towards showing actual returns on all that AI spending. We hold Meta at a 2% position in our tactical growth portfolio, and I’m looking to increase it. Technically speaking, META was in a downtrending channel since last summer and just recently broke out from resistance at $665 with weekly volume that has been positive for the past 4 weeks. All-time highs of $796.25 are in our sights. The META / SPY and even META/MAGS ratios are breaking higher. Hyperscalers are again starting to lead the broader market and as this lower panel ratio chart shows, META is leading the hyperscalers. This is a percent change for the Magnificent Seven from Aug. 1, 2018, through today. It’s amazing how much the Mag Seven are not created equal. Nvidia is a runaway leader, and that’s not a coincidence given where the article is headed. Nvidia is the company collecting all of the AI hardware spending rather than doing the spending. Meta sits near the bottom of the group, ahead of only Amazon — which is a much slower grower and a low-margin retailer. So, why did I pick a random-looking date like Aug. 1, 2018, to start the chart? That was the date, more than eight years ago, when Meta moved into first place among the Magnificent Seven in capital expenditures as a percent of trailing 12-month revenue. Being No. 1 here is not an honor. It means you’re plowing more of every revenue dollar back into buildings and hardware than any of your peers. Meta has held that spot ever since. Line those two charts up, and you have the whole story of Meta’s last past eight years: The biggest relative spender in the group and one of the weakest stocks in the group. The market has never been paid for the spending. The question is whether that’s finally about to change. Everybody’s focused on free cash flow right now, and I understand why. However, free cash flow is a lagging number in the middle of a buildout. What I watch instead is capex as a percent of revenue. Meta went from 16% of revenue in 2021 to 35% last year, and it’s slated to still climb as high as 63% in 2027, but then expectations are for it roll over. Capex in isolation is expected to grow from 99% this year to 38% next year, and then just to a basically flat figure of 8%. The big spend is front-loaded and once the data centers are built, revenue keeps growing, cutting down that lofty capex / revenue figure shown above. The other way to look at it is operating cash flow divided by capex — can the core business pay for its own buildout? That ratio was 2.40 in 2024. It drops to 0.95 this year and 0.87 in 2027 — that’s why free cash flow goes negative, but then recovers to 1.02 in 2028 and 1.39 by 2030. Operating cash flow as a percentage of revenue climbs right through it, 56% to 61%. The ad engine can power this company back into fiscal responsibility. Bottom lining it, Muse will not reduce capex. Zuck giving away 100 million tokens per week takes serious compute so it probably raises capex as discussed. But expectations by the analyst community do include marginal revenue from Muse. META has some serious barriers to overcome to become a hyperscaler leader once again. I’m holding a conservative 2% position in it and with an increasingly positive technical take, followed by confirmation that revenues will grow as capex spend has a finite life, I will work back to a market overweight position in META. -Todd Gordon, Founder of Inside Edge Capital, LLC We offer active portfolio management and financial planning for retail investors, as well as regular market updates like the idea presented above. DISCLOSURES: Gordon owns META personally and for clients of his wealth management company Inside Edge Capital, LLC. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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