Better AI Stock: Alphabet Vs. meta platforms

No subject has attracted more attention in the last two years than the sudden rise of all things artificial intelligence (AI). Business leaders are trying to position their companies to take advantage of this technology, while governments will likely lag behind when it comes to regulatory clarity. And then there are investors who want to find ways to profit from the trend.

It’s a good idea to look at dominant tech companies to gain exposure. For example, Alphabet (GOOGL 1.11%) (GOOG 1.17%) and Meta platforms (META -0.74%) invest aggressively to strengthen their competitive positions. But which of these internet giants is the best AI stock to buy right now?

Getting even stronger

Alphabet has been using artificial intelligence and machine learning since 2001, when its Google search engine helped users with spelling. These days, AI permeates the DNA of the company. “All six of our products, with more than 2 billion monthly users, now use Gemini,” CEO Sundar Pichai emphasized. The Q2 2024 earnings call. Gemini is the company’s AI model.

It’s worth noting that the business probably won’t introduce a new, game-changing AI use case. Instead, the technology will be used to bolster Alphabet’s already popular offerings. For example, since adding AI suggestions to Search, management has mentioned that it can expand the types of queries that can be answered.

And when it comes to Google Cloud, Alphabet offers customers numerous solutions. The business benefits from the convergence of off-premise IT spending as well as the growing AI needs of companies. Google Cloud is set to be an indispensable partner for its customers, more than it already is.

With its hugely popular family of apps, Meta is used by billions of people every day. This immediately gives it unparalleled reach to launch and test AI features, receiving valuable feedback that can direct product development efforts.

For these users, the company launched Meta AI, which is essentially a powerful chatbot assistant. Users can generate images, find food recommendations and learn about new topics. And Meta AI is fully integrated into Ray-Ban smart glasses, giving its wearers a seamless experience of interacting with the technology.

Meta generates almost all of its revenue from digital advertisers, so it needs to cater to this valuable group. “In the long term, advertisers will basically be able to tell us a business objective and a budget, and we’ll go do the rest for them,” founder and CEO Mark Zuckerberg said on the company’s earnings call in Q2 2024.

Alphabet and Meta could be two of the most solid financial businesses any investor can own if they want to bet on the AI ​​craze. Both generate tens of billions of dollars in free cash flow each quarter.

And theirs Audits they are in perfect condition. This gives them unlimited resources to continue to invest aggressively in expanding their network infrastructure, something they are not holding back on.

Best course of action

Clearly, both Alphabet and Meta are in enviable positions when it comes to the AI ​​race. They already have thriving platform businesses with billions of users to introduce new features to. And there aren’t many businesses with the talent and financial resources these two have.

Investors should consider their valuations as part of the analysis. Transactions with alphabet to a forward P/E ratio of 22, while the Meta opts for a forward P/E multiple of 25. These are the two cheapest stocks in the “Magnificent Seven”, which is obviously a compelling proposition.

If I had to pick just one winner, I’d go with Alphabet. But I see absolutely no reason why an investor couldn’t buy both stocks and not have adequate portfolio exposure to the current AI trend.