For nearly two years, AI has been the word that’s helped push many tech companies higher, particularly large-cap companies. That’s because those firms have been at the forefront of AI spending. For large enough companies, spending a few billion to build out AI is no big deal.
While the market is shifting towards other parts of the AI story, many big-tech companies can still trend higher for a more fundamental reason. They generate massive amounts of cash.
If that money isn’t being spent on AI, it can go elsewhere. Dividends, share buybacks, acquisitions, or growing the core business are the main choices.
And some big cap stocks are still cheap, even near all-time highs. For instance, Meta Platforms (META), has rallied 86% over the past year thanks to strong advertising on the platform.
But shares can trend higher, given the company’s massive 73% growth in earnings and hefty 34% profit margin. Shares still look inexpensive at 23 times earnings, given the high growth today.
Action to take: While shares are near 52-week highs, they’re still trending higher. Buyers may want to build a stake now, and use any market weakness over the coming weeks to add to that position. Meta recently started paying a dividend, with a 0.3% yield.
For traders, the February 2025 $660 calls, last trading for about $24.00, could see mid-double-digit returns on a year-end rally into the start of next year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.