Nvidia has captured the vast majority of artificial intelligence (AI) investment dollars. This has shown up in its pricey valuation, and I think it's time for investors to look elsewhere for AI investments.
Meta Platforms (NASDAQ: META) is one of the top AI investments that I think doesn't get enough attention. This is a premier company, and its valuation is attractive despite the stock being near all-time highs. I think Meta is one of the best buys in the market and should be considered long before Nvidia.
Meta has a cash cow to fund its AI research
Meta Platforms is the parent company of hugely popular social media platforms Facebook, Instagram, Threads, WhatsApp, and Messenger. Meta makes money on these platforms through advertising. Indeed, 98% of Meta's Q2 revenue came from advertising, so it's critical that this industry continues to do well. Advertising is cyclical, so this side will eventually see some more challenges, but it's doing great right now.
The company also has to continue innovating to stay on top of its game, which is why it invests so much in its AI models. Meta's generative AI model, Llama, is currently in its 3.1 version. Still, Meta is already working on Llama 4, which is expected to take 10 times the computing power as its previous generation because of its more in-depth training.
By building an industry-leading AI platform, Meta can integrate it into advertising to better pinpoint ads and make them more personalized. This has implications for its virtual and augmented reality products.
Reality Labs is another division of Meta, but so far it really just spends money. In Q2, it generated just $353 million in revenue while running up a bill of $4.5 billion in operating expenses. This division houses products like the Meta Quest, but will eventually include more practical products like the sunglasses it collaborated with Ray-Ban to produce.
These sunglasses don't have a ton of practical uses besides streaming video from your perspective. Eventually, Meta's AI model could take the video and use it to provide information about a task, like cooking. The possibilities for these assistants are endless, and Meta, with more resources than most of its competitors, will likely lead the way.
This is why Reality Labs is burning so much cash: It's pioneering unexplored possibilities. Luckily, Meta's advertising platform makes enough money that the combined business is still a great investment.
Meta has strong growth for a great price
Even with Reality Labs losing so much money in Q2, Meta still produced a 38% operating profit. Combined with strong 22% revenue growth, this is a perfect recipe for a business that can rapidly grow profits. This is exactly what Meta did in Q2, with earnings per share (EPS) soaring 73%.
While it isn't quite Nvidia-level performance, it far exceeds that of Apple or Microsoft . These two trade for 34 and 32 times forward earnings, respectively. That's a huge premium over the S&P 500 's 23 times forward earnings price tag. However, neither of these two is growing at that impressive of a rate.
Meta Platforms, trading for about 25 times forward earnings, looks like a far better buy. That's far lower than Nvidia's 42 times forward-earning price tag, which means two shares of Meta controls about the same amount of the company as one share of Nvidia does.
META PE Ratio (Forward) data by YCharts
With Meta, the business just needs to maintain the status quo and could even slip up a bit. With Nvidia, it must maintain perfection or the stock will be drastically sold off.
I would like to have some margin of safety in my investments, and Meta Platforms probably has the best of all the big tech companies. Meta is a fantastic AI investment and remains reasonably priced despite nearing all-time highs. Investors should have Meta at the top of their shopping list when it comes to looking at AI companies.
Should you invest $1,000 in Meta Platforms right now?
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keithen Drury has positions in Meta Platforms. The Motley Fool has positions in and recommends Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
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