Meta Platforms (NASDAQ:META) saw its shares climb roughly 3% on Wednesday after the company unveiled Muse Spark 1.3, a new AI model designed for coding and complex agentic tasks. The release provided fresh evidence that Meta's heavy AI spending may be translating into tangible product improvements, easing some investor concerns about the returns on its infrastructure investments.
According to Meta, Muse Spark 1.3 uses about 20% fewer tool calls and 25% fewer tokens than its predecessor, Muse Spark 1.2, when handling comparable engineering work. The model is now available through Muse Code and the Meta Model API, and it is designed to manage longer-horizon tasks and multiple workflows within a single thread.
BofA reiterates bullish stance
Bank of America analyst Justin Post reiterated a Buy rating on Meta with a price target of $810, implying roughly 32% upside from the stock's September 3 close of $610.68. Post highlighted Meta's rapid model-release cadence and noted that the agentic improvements are particularly relevant as the company develops its consumer AI agent, internally known as Hatch.
BofA also pointed to a potential hardware advantage. The firm estimates that Meta's planned MTIA custom-chip deployments could eventually account for 15% to 20% of its total AI capacity. Greater reliance on in-house silicon could help lower computing costs as workloads expand, providing a margin tailwind over time.
Valuation gap and market context
At the time of BofA's analysis, Meta was trading near $617, or roughly 18 times projected 2027 GAAP earnings. That compares with its historical average of about 21 times and the broader market's multiple. BofA's $810 target is based on 24 times projected 2027 earnings, suggesting the market may be undervaluing Meta's AI-driven growth potential.
Bernstein also remains bullish, reiterating an Outperform rating and an $800 price target. The firm argues that Meta's AI-enhanced advertising engine remains a major competitive advantage and that the company is on track to rival or surpass Google Search in advertising revenue. Bernstein believes Meta does not need Muse Spark to become a standalone business on the scale of OpenAI; instead, better models can improve recommendations, ad targeting, engagement, and developer tools across Meta's apps, with the payoff appearing inside its existing profit engine.
KeyBanc more cautious but still positive
KeyBanc remains constructive on Meta but has trimmed its price target to $760 from $855, while keeping an Overweight rating. The firm acknowledged that Meta Superintelligence Labs has made "meaningful progress" with Muse Spark and argued that investors are "under-appreciating platform stickiness" among consumers and advertisers. However, the reduction in target reflects a more conservative view on near-term upside.
The burden of proof
Despite the optimism, the risk remains that Meta's AI spending continues to escalate. The infrastructure push is raising fixed costs and pressuring margins and free cash flow. For the stock to sustain its upward trajectory, investors will want to see concrete evidence that Muse Spark gains adoption, that agents like Hatch become useful products, and that MTIA chips actually reduce computing costs.
As the AI arms race intensifies, Meta's ability to monetize its investments will be closely watched. The company's next earnings report and any further updates on its AI roadmap will likely provide more clarity on whether the current valuation is justified.
This article is for informational purposes only and does not constitute financial advice.
