Muse Goes Viral, Sheds Shadows! Meta Soars 36% This Month, Just 1% Away from $2 Trillion Market Cap

Meta Platforms Inc. (META-US) has finally delivered the breakout performance investors have been waiting for. Following the rapid rise of its artificial intelligence (AI) assistant Muse to the top of Apple's App Store, the company's stock price has surged 36% since the beginning of September. Just a 1% further increase would push it into the elite $2 trillion market capitalization club.

Muse's success has alleviated market concerns that Meta's massive AI spending might not yield sufficient returns. Rob Biederman, co-founder and managing partner at Asymmetric Capital Partners, said: "Muse clearly validates Meta's AI strategy and positioning. The stock had been largely flat over the past year and a half because the market didn't know whether AI would ultimately have a positive or negative impact."

He added: "AI agents could become the entry point to the internet for many people, which would tilt the balance of power toward Meta."

Best Monthly Performance Since 2013

Meta closed Thursday (24th) up 4.5% at $777.59 per share, putting it on track for its best monthly performance since July 2013—a sharp reversal from the sluggish trend that dominated most of this year.

Just under six weeks ago, Meta's year-to-date stock price had fallen 18% after delivering disappointing revenue forecasts, and in August, it was among the bottom 50 performers in the S&P 500 index. However, since then, Meta's stock has soared 43%, making it the third-best performing component in the S&P 500.

Renewed Fears of AI Disruption

Investor enthusiasm for Muse has also spilled over into other sectors. Concerns that Muse could disrupt multiple industries have led to sell-offs in financial, insurance, and travel company stocks—similar to the selling pressure seen earlier this year when Anthropic launched its AI products.

Meta has already announced partnerships with Instacart, owned by Maplebear Inc. (CART-US), and online travel giant Expedia (EXPE-US).

Multiple new products unveiled at Meta's developer conference on Wednesday received favorable analyst reviews, including a handheld device designed to work with Muse and a camera-free version of the Meta smart glasses lineup.

Doug Anmuth, an analyst at JPMorgan, recently upgraded his rating on Meta stock from "Neutral" to "Overweight," stating: "Given that Meta is still in the early stages of rolling out advanced models and AI-driven products, there remains substantial upside potential beyond its advertising business."

AI Spending Surge Threatens Free Cash Flow

Of course, Meta must still prove that its AI investments will generate enough revenue to justify the enormous spending. The company's capital expenditure this year is estimated to approach $140 billion—double the approximately $70 billion expected in 2025, and projected to rise further to $197 billion next year and $215 billion by 2028.

This massive spending is already eroding Meta's cash flow. While Meta generated $46 billion in free cash flow last year, market expectations suggest it will turn negative by $6.4 billion in 2026 and fall further to negative $29.2 billion the following year. This places increasing pressure on Meta to deliver growth.

Meta's forward P/E ratio has already reached 21x, significantly higher than the sub-14x low seen in June, though roughly in line with Meta's average P/E over the past three years and slightly below the Nasdaq 100 index's 22x.

Biederman of Asymmetric said: "Right now, Meta is trading at a lower-than-market P/E while delivering above-market growth—just that alone is highly attractive. Moreover, the company has massive scale and distribution capabilities, advantages that are difficult for competitors to challenge."

Watch for Sudden Shifts in Market Sentiment

Notably, despite Meta's strong stock performance, the rally has been so sharp and sudden that any shift in market sentiment could quickly trigger a pullback—especially given how frequently AI-related investor sentiment changes.

Brandon Pizzurro, Chief Investment Officer at GuideStone Funds, said: "Market sentiment toward large AI companies seems to shift as frequently as new AI model releases. Products like Muse act as a shot in the arm, providing fresh catalysts for the market. But the bar for impressing investors again is getting higher, and there's ample reason for the market to worry whether these companies can actually deliver results."

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