Meta Platforms unveiled a flurry of AI initiatives this month — from lower-cost smart glasses and an enterprise tool for businesses to plans to build a prediction-markets app and a key partnership with Qualcomm to bolster its computing power. But none of it has seemed to connect with investors. The social media giant’s stock remains one of the worst-performing mega-cap stocks this year, down more than 17%. Among the “Magnificent Seven,” only Microsoft has done worse, down 26%. Wall Street analysts say the reason is simple: Investors are no longer judging Meta by how much AI-related stuff it can create; they’re waiting to see whether those products and services will generate enough sales and earnings to justify the company’s aggressive spending on data centers. That AI investment cycle, among the highest ever capital expenditures, is the “elephant in the room” that the Street is focused on, Piper Sandler analyst Thomas Champion told CNBC. “Most analysts are quite positive on Meta’s core ad business, but we know that they’re investing very aggressively on a capex basis, and so the cash flow is basically going to zero,” he said. Meta’s first-quarter results, reported on April 29, reinforced those concerns. The company raised its capital spending guidance for fiscal 2026 to $125 billion to $145 billion, a $10 billion increase at the midpoint to $135 billion, due to rising costs for memory, chips, and other components needed for data centers. Shares of Meta plunged 9% on the report. A day later, Bloomberg reported that Meta was planning a $25 billion bond sale to fund its AI spending. Champion called Meta’s capex raise a “disappointment” that overshadows its robust top-line growth. “That was the one thing they couldn’t do and have the stock react positively,” he said, adding the stock’s returns have been “pretty mediocre” ever since. “That pattern has to be broken.” Another strike against Meta, says Jim Cramer, is that it doesn’t have a high-margin cloud business like the other hyperscalers in Alphabet , Microsoft, and Amazon . Their cloud businesses help justify their own hefty AI spending. However, Meta does have a stellar and reliable ad business. Jim added that he would be inclined to trim Meta if the stock spikes. “They’re very disappointing,” he said during the June Monthly Meeting for Investing Club members. “Meta is having a difficult time explaining to the market that its AI investments are worth sacrificing all its free cash flow for,” said Jeff Marks, the Club’s director of portfolio analysis. “Until it can prove its investments are creating new and meaningful revenue streams, the market is going to remain uncomfortable with its level of spending,” he added. Champion agrees that investors need evidence that spending is stabilizing rather than accelerating. Going into the second quarter, he’d welcome seeing some benefit from cost optimization across the company, whether from its AI projects or from Meta holding the line on capex. Revenue growth is critical, too. “Nothing drives value like top-line growth,” Champion said, pointing to Meta’s ability to continue growing revenue more than 20% annually despite already generating about $250 billion in annual sales. That’s not to say some of Meta’s new initiatives won’t be winners. In a Thursday research note to Piper Sandler clients, Champion said the company’s new AI-powered business messaging agent will automate customer support, offer product recommendations, schedule appointments, and manage transactions across WhatsApp, Messenger, and Instagram. The analyst wrote that it’s an “underappreciated” market that could exceed $75 billion annually and eventually “unlock the next wave of revenue growth” for Meta. Piper Sandler also highlighted the growth opportunity in business messaging in emerging markets such as India, Vietnam, Indonesia, and Thailand. This AI tool “collapses the cost barrier limiting developed market adoption” in these countries. The firm notes that early adoption is encouraging, as Business AI conversations grew from 1 million to 10 million weekly in the first quarter. Evercore ISI highlighted another viable revenue stream beyond advertising. In a research note this week, analysts said Meta One, a paid AI subscription offering that provides users with extra features on Meta’s Family of Apps, is a “revenue diversification play with the potential to modestly impact revenue and more meaningfully impact operating income over time.” There are different pricing tiers of the offering for either individual consumers or businesses. Meta One Plus will cost $7.99 a month, and the Meta One Premium plan will cost $19.99 a month. Meta One is currently in limited testing and isn’t available in all locations. Evercore’s confidence in AI subscriptions stems from the more than 3 billion daily active users across Meta’s social media platforms, as well as the growing online presence of businesses. “Even modest penetration against Meta’s multi-billion-user ecosystem could create a meaningful high-margin revenue stream over time,” the Evercore analysts said. The firm outlines a reasonable scenario in which Meta reaches 2% to 4% penetration of the Meta One offering over the next two to three years, implying $5 billion to $10 billion in incremental revenue and $3.5 billion to $7 billion in incremental operating profit by 2028. While the analysts said their assumptions could be off since this is a newer offering, they point to Snapchat+ as a benchmark, which is a similar social subscription. That offering has converted more than 5% of Snapchat’s 25 million daily active users. Evercore has an outperform rating on Meta and a target price of $930. At the moment, Meta’s valuation already reflects investor concerns about AI spending, and doesn’t account for future AI revenue opportunities from the recently announced AI projects. Champion highlighted that Meta is “trading below the market, which is interesting because it’s certainly growing revenues faster than the market.” The S & P 500’s forward P/E ratio is sitting around 21, compared to 16 for Meta. Piper Sandler has a buy rating on Meta and a price target of $800. (Jim Cramer’s Charitable Trust is long META. 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. 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