Meta stock got the 18% pop Jim Cramer said it could on cloud news. What's next?
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CNBC Finance
5 min read
Meta Platforms finally delivered the rally Jim Cramer said was possible if Wall Street became convinced it could generate revenue from its massive artificial intelligence investments. The big question now: Where does the Club stock go from here? Shares of the Facebook and Instagram parent climbed nearly 18% from their June 30 close â the session before news that CEO Mark Zuckerberg plans to start a cloud business. Jim had been floating the cloud idea for weeks â saying struggling Meta stock could add $100 per share on such an announcement, which it did in Friday's more than 5% gain to over $667 per share. Shortly after confirming the July 1 cloud news , Jim said: "Until today, our feeling was, what the heck is Meta doing?" At the time, he added he was pleased Meta planned to stand up a "profitable enterprise to their customers." In a Bloomberg interview published Thursday, Zuckerberg discussed the cloud and shot down the bear case that the move signals that Meta has overbuilt its AI infrastructure. "The offers that you get for using the compute are so high that it may make sense, in some cases, to rent out or consider those kinds of deals instead of your own internal uses," the CEO said. "I don't know anyone in the industry who feels like they have too much compute." During Friday's Morning Meeting , portfolio director Jeff Marks said this week's nearly 14.5% Meta rally shows the Street is finally coming around to our views. Meta was our best-performing stock this week. "This idea that Meta is showing more forms of monetization of this huge capex cycle ⦠is why the stock is rallying now," Jeff explained. META 1Y mountain Meta Platforms 1 year Investors are also celebrating Meta's launch Thursday of Muse Spark 1.1, which represents the company's "strongest model for agentic and coding work yet," said Meta AI chief Alexandr Wang in an interview with CNBC. The upgrade can write and debug code; use software and external tools; understand text, images, and video; and carry out complex tasks, with less human intervention. The Spark allows Meta to compete with leading AI labs such as Anthropic and OpenAI by offering advanced AI coding and agentic capabilities. This week's momentum in Meta stock is a change of pace after months of investors shrugging off Meta's steady stream of AI announcements â from cheaper smart glasses to a Qualcomm chip partnership â because none directly addressed the stock's biggest overhang, which was uncertainty about how Meta will earn a return on its massive AI spending. Like its hyperscaler rivals, Meta has already invested billions and billions of dollars to keep pace in the AI arms race. The Zuckerberg-led company expects capital expenditures of $135 billion at the midpoint of its guidance range this year. For comparison, Microsoft plans to spend roughly $190 billion on capex this calendar year. While that is above Meta's outlook, the key difference is Microsoft has a cloud business to serve. A similar defense applies to Alphabet 's $180 billion to $190 billion in projected 2026 capex, as well as Amazon's guidance for $200 billion . To be sure, Big Tech chief executives are all feeling the pressure to show a return on investment on their AI spending. Last month, Alphabet chose to issue $85 billion in new stock to help offset its capex plans. Amazon has issued debt, including this week's news of a $25 billion bond sale. Bottom line Between selling compute and moving to a more capable artificial intelligence model, if Meta can deliver on how it plans to monetize these investments beyond its traditional digital advertising business, then we think the stock should continue to make a comeback. We're in good company. Analysts on Wall Street overwhelmingly see Meta as a buy â 91% to just 9% with holds. The mean price target is nearly $821, which implies more than 20% upside. The Club has our buy-equivalent 1 rating on Meta and a $750 price target. To be sure, even with this week's strong rally, the stock is only just over breakeven year to date. Shares also have more work to do to get back to its record-high close of $790 in August 2025. (Jim Cramer's Charitable Trust is long META, GOOGL, AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
