Better Artificial Intelligence Stock: Nvidia vs. Meta Platforms

Investors have sought out artificial intelligence (AI) stocks over the past few years because of the technology's great potential. AI promises to streamline business operations and reduce costs -- and even make our daily lives easier. And that may equal significant revenue growth for a number of companies in the space.

Two in particular that stand out are Nvidia (NASDAQ: NVDA) and Meta Platforms (NASDAQ: META). Nvidia has already been generating enormous levels of revenue thanks to AI, as it is the seller of the world's top-performing AI chip. Meta, a social media giant, is investing heavily in AI research and development with the goals of supercharging its advertising business and becoming a general AI leader.

Both companies make smart AI buys. But which is the better one to invest in today? Let's find out.

Image source: Getty Images.

The case for Nvidia

Nvidia sells graphics processing units (GPUs), or the chips that power the most important of AI tasks, such as the training of large language models. And the company also offers a complete array of supporting products and services, making it a true AI giant. Since Nvidia's offerings are powering the AI processes of today, the company already is bringing in revenue from this hot technology.

In fact, Nvidia's earnings are soaring. In the last full year, revenue rose in the triple digits to more than $130 billion. The company is scheduled to report its latest annual figures on Feb. 25, and there's reason to be optimistic about the announcement. In recent quarters, Nvidia has spoken of soaring demand, and that has translated into unstoppable growth.

Nvidia stock rose 38% last year, and the company's valuation climbed, but it still remains reasonable, at 37x forward earnings estimates, considering the earnings track record and future potential as the AI boom enters its next chapters.

The case for Meta

Meta is the owner of Facebook, Messenger, WhatsApp, and Instagram -- so you may not immediately associate the company with AI. But Meta has big AI ambitions. The company is developing AI features that it's rolled out across its apps to keep us on them longer. This is key because Meta generates most of its revenue from advertising, and advertisers may spend more here if they know that we're often on these apps.

The company also aims to revolutionize advertising across its platform, automating it to make it more efficient and effective. This, too, should keep advertisers coming back.

Unlike Nvidia, Meta isn't generating revenue directly from AI right now, but this use of AI could seriously boost revenue in the years to come. Meanwhile, the company continues to generate steady earnings growth thanks to its social media dominance, which leads to advertising revenue.

Today, Meta stock is dirt cheap, trading for about 19x forward earnings estimates.

Which is the better buy?

The advantage of Nvidia is it's already bringing in revenue -- and at impressive levels -- thanks to its AI business. And the momentum is likely to last, as we still are in the early chapters of the AI growth story. Analysts expect the market to reach into the trillions of dollars in just a few years.

Meta, as mentioned, is investing in AI but isn't yet directly bringing in tons of revenue from this investment. And this has weighed on the stock as investors worried that Meta might be overinvesting in this area.

However, Meta, even as it spends on AI, still is growing earnings and paying a dividend to investors. And the company is monitoring its buildout and has said that, in the worst-case scenario, it would slow spending and grow into the capacity that it's built so far. So, Meta seems to be wisely managing risk.

As I said earlier, both of these stocks make interesting AI bets. But, with Meta, a promising player in the field, trading at a dirt cheap price, this stock may be the better one to buy right now.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.