Its newly released Muse AI agent is enjoying early success, and its two new flagship frontier models, Muse Wonder and Muse Wonder Full, have renewed investor interest and earned analyst praise. Wall Street likes what Meta is doing.

The successful launch of new models and a capable AI agent offers more proof that Meta’s massive spending spree is translating into results. It also doesn’t hurt that CEO Mark Zuckerberg can rely on his legacy ads business to keep his AI ambitions afloat while using it to market Meta’s future to its existing customers.

Google (GOOG, GOOGL) has that too. But OpenAI (OPAI.PVT) and Anthropic (ANTH.PVT) do not.

While hardly a secret, Meta’s ads machine is an underlooked aspect of the company’s AI turnaround strategy. That’s because, as every tech company is still figuring out how to make money from AI — Anthropic with business clients, and ChatGPT with subscriptions and a nascent ads platform — Meta already has a business model in place.

That makes it easier to fend off analyst skepticism about returns on investment.

As Bank of America analysts led by Justin Post wrote in a note on Wednesday, Meta’s higher-performing models will have a complementary and reinforcing impact on the company’s ads business. A more capable model, Post said, could enhance content recommendations and ad targeting, as well as improve advertiser returns and boost their spending.

Smarter AI means more social engagement, leading to more value for advertisers and bigger ad budgets to buoy Meta’s revenue. Easy justification for Zuckerberg’s massive infrastructure spending.

Facebook leaning on its popular platforms as vehicles for its AI is part of the long-standing bullish take on the tech giant. But that thesis has more cachet now that Meta appears to have clawed its way back from organizational disarray to a ChatGPT rival.

Looking beyond Muse’s honeymoon phase, Meta already has the monetization aspect, or at least a part of it, in place. If agents become the next-generation computer interface, Meta already has a colossal ad platform and recommendation engine to connect users with brands and to supplement subscription and enterprise revenue.

Meta faces other risks, though. It’s still early days for Muse, and slowing usage could poke holes in Meta’s bullish ads-based story. And the rise of AI agents could require an even bigger infrastructure build-out, testing investor patience. And while Anthropic and OpenAI would be hard-pressed to replicate Facebook’s ad dominance, it’s only a matter of time before Google launches its own agents to take on Muse.

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.

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