Meta Platforms Inc - Class A

We view Meta as one of the clearest beneficiaries of AI, which is driving higher engagement through better content recommendation, greater ad monetization through improved targeting, and meaningful product innovation in consumer and business agents. Though still in the early days, these benefits are already visible in greater revenue acceleration in Meta's core advertising business, which is growing at its fastest quarterly pace since 2021. Following this year's elevated investment, we expect Meta to grow earnings at a 20%-plus rate over the next few years. Against this growth backdrop, we view Meta's 18 times forward earnings multiple as a highly discounted valuation for a dominant consumer internet franchise with a stable user base of 3.6 billion daily active users.

Meta Platforms has uniquely powerful data and distribution advantages and the company is investing aggressively in its own artificial intelligence models and compute to make its advertising platform more effective. Meta’s core business has among the most straightforward and compelling commercial use cases for AI that we are aware of. The company’s ability to leverage and improve its own models within this robust and proprietary feedback loop should draw additional advertising dollars and further the company’s lead in time. We initiated a position in Meta in our Concentrated strategy and added to our existing position in Core during the second quarter.

Meta has been a somewhat unique constituent of the Rozendal Global Fund. Our assessment in 2019 and early 2020 was that the market’s pessimism about Meta was overdone. The company’s ability to deliver value to advertisers remained unparalleled. The treasure trove of data that the company had of users enabled the delivery of advertisements with a degree of accuracy that could not be attained on any other media platform. At a price well below $200 per share, Meta offered compelling value to us. Two of the company’s key assets (Instagram and WhatsApp) were still vastly under-earning compared to their scale and user engagement.

Meta is positioned strongly within the ongoing AI infrastructure build-out, as evidenced by its significant capital expenditures. The company has committed to enhancing its AI compute capacity, which is crucial for its future growth. The hyperscaler capex, including Meta's, has risen dramatically, indicating a robust demand for AI-related services. This trend suggests that Meta's investments will yield substantial returns, reinforcing its competitive moat in the technology sector. The manager believes that Meta's strategic focus on AI will improve its legacy business and drive long-term value.

Meta Platforms has recently increased its 2026 capex plans by around $10 billion due to DRAM inflation. However, the warrants Meta holds on Advanced Micro Devices (AMD) are now estimated to be worth close to $90 billion, significantly exceeding the incremental DRAM inflation. This sourcing advantage from its scale provides Meta with the bargaining power to manage commodity cost inflation effectively. We believe this economic hedge has been overlooked by investors and will bolster returns for years to come, positioning Meta favorably in the AI spending boom.

In the second quarter of 2026, we added to our position in Meta on share price weakness, reflecting our belief in its strong fundamentals and potential for growth driven by AI-related investments. The ongoing AI revolution is expected to create significant opportunities, and we see Meta as well-positioned to capitalize on this trend. The excitement surrounding AI and its implications for corporate earnings reinforces our positive outlook for Meta, as we anticipate continued strength in the company's performance in the second half of the year.

We believe that consumer AI will be monetised through engagement, not through subscriptions or by AI substituting for 'work'. High-engagement platforms like Meta will continue to benefit from consumer AI. Taking Mr Spolsky’s playbook of commoditising your complements, we see ample room for Meta to commoditise intelligence and earn money elsewhere. The value equation is simplified because there is an obvious, measurable human to compare costs and benefits against, making Meta's position in the market compelling as AI continues to evolve.

Meta delivered a strong quarter as improving ad fundamentals and growing AI monetization prospects drove a rebound in the stock. The company reported approximately 20% revenue growth and expanding operating margins. Engagement in Reels and messaging commerce continued to climb, while Meta’s May AI event showcased early monetization pilots involving its Llama 3 model across WhatsApp and Instagram. The market responded favorably to Meta’s improving execution and clearer roadmap for AI integration. Ad pricing trends stabilized, and the company’s renewed focus on operational efficiency supported margin expansion. Investors viewed Meta’s AI strategy as complementary to its core ad business, with incremental monetization opportunities ahead.