Investors have been asking for months how Meta will profit from AI. Today they may have gotten their first answer.
Meta is up more than 6% today, and the main reason is the launch of its new AI agent, Muse. And I think it's more important to understand why the market is reacting so positively than just the product introduction itself.
The company is set to invest up to $130-145 billion in infrastructure this year, primarily for AI. After the latest results, this has started to worry investors quite a bit. FCF in Q2 fell from $8.55 billion to just $784 million, and operating margin from 43% to 31%. The market therefore began to ask: where is the return on these massive AI investments?
Muse could be the first real answer
It's an autonomous personal AI agent that is supposed to actually perform tasks on behalf of the user (it can send emails, book flights or restaurants, shop, or work with calendars and other apps...)
It runs on Meta's own Muse Spark model, and Meta built it on a separate secure virtual computer through which the agent can use the web and other apps similarly to a human. It's currently available in the US through a standalone app and WhatsApp.
Where it gets very interesting
Compared to most AI startups, Meta has a huge distribution advantage – Facebook, Instagram, and WhatsApp are already used by billions of people. So it doesn't have to build Muse's user base entirely from scratch. Moreover, a completely new revenue stream is emerging. Most usage is supposed to be free, but higher limits will be available through subscriptions at $20 and $100 per month. That means AI no longer has to only increase engagement and advertising efficiency, but can gradually become a standalone business.
Analysts also reacted
Mizuho Bank called Muse the start of a potentially major new product cycle, which in their view is not yet fully priced into the stock. The biggest question for investors, according to them, was precisely the return on AI investments, and Muse represents a significant step toward demonstrating it. The very first user interest is also positive. Meta stated that usage of Muse after launch significantly exceeded internal expectations, and the app became one of the trendiest free apps in the US App Store.
And what about Threads?
That was also a secondary catalyst. Zuckerberg said that he believes Threads is already about the same size as X, or will surpass it very soon (the network now has more than 500 million monthly users). For Meta, it's therefore another potential advertising platform with a huge audience, which it can monetize over time similarly to Instagram.
My view
Of course, this doesn't yet mean Muse will be successful; Meta still has to prove mass adoption, product safety, and especially people's willingness to pay for it. But it can at least strengthen sentiment, which has been quite negative lately. Do you think today's rise in Meta is justified, or is the market reacting too optimistically to Muse? 👇