Assessing Investment Potential: AT&T vs. Verizon in AI Era

Telecom leaders AT&T (NYSE: T) and Verizon Communications (NYSE: VZ) may not first come to mind in the artificial intelligence (AI) landscape. However, their high-speed, low-latency connectivity services are essential to the data-intensive AI ecosystem.

Both companies are capitalizing on their 5G and fiber optic networks to cater to the rising demand for edge computing that fuels AI workloads. This trend, along with strong performance in their core wireless divisions, has significantly benefited shareholders; year-to-date, AT&T’s stock has risen by 19%, while Verizon’s has increased by 13%.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Despite these gains, both companies continue to present attractive high-yield dividends, appealing to investors looking for income opportunities in 2025. The question remains: which stock is the better buy for your portfolio? Let’s examine the critical factors.

Image source: Getty Images.

The Case for AT&T

AT&T has positioned itself as one of the year’s notable comeback stories, with its shares surging by 58% over the past twelve months. This turnaround follows the company’s strategic shift to its core telecom strengths, including exiting media ventures, such as the impending sale of DirecTV.

For the year ending December 31, 2024, the mobility segment experienced a 3.3% revenue increase, reflecting a resurgence in net subscriber growth. Additionally, the extension of its fiber network has driven consumer broadband revenue up by 7.2% in 2024, attracting positive market attention.

AI contributes to this growth, as AT&T employs automation within a larger cost-reduction strategy and capitalizes on demand for what it calls “middle mile infrastructure,” connecting various AI applications to end users. Stronger-than-expected earnings and robust free cash flow have positively impacted its balance sheet, reducing net debt.

Looking ahead to 2025, AT&T anticipates continued growth and improved financial health. This outlook is promising for potential investors attracted by the stock’s 4.1% yield. While unconfirmed, a dividend increase may be on the horizon, with the company also announcing a $10 billion share buyback program.

Investors who believe AT&T is moving towards more sustainable and profitable growth have solid reasons to consider buying and holding this stock.

The Case for Verizon Communications

While AT&T’s recent stock surge is noteworthy, Verizon has pivotal advantages that may make it the superior investment choice. Both companies have nearly equivalent market capitalizations, each around $195 billion. Nevertheless, Verizon boasts greater total revenue and better profitability, yielding stronger free cash flow for 2024.

Verizon’s long-standing history of consistency is a key factor, with expectations for steady growth continuing.

Currently, Verizon shares trade at a forward price-to-earnings (P/E) ratio of approximately 10, which is significantly lower than AT&T’s ratio of 13. This discrepancy suggests that investors might receive better value with Verizon stock, a sentiment reinforced by its higher dividend yield of 5.8%.

Additionally, Verizon appears to have a clearer strategy related to AI. The company recently launched its Verizon AI Connect solution, aimed at helping businesses effectively deploy and scale AI workloads.

Verizon is collaborating with technology leaders such as Alphabet, Meta Platforms, and Nvidia to meet the evolving demands of AI. Moreover, the pending acquisition of Frontier Communications will significantly enhance its fiber footprint, further improving its market position.

VZ PE Ratio (Forward) data by YCharts.

Decision Time: Favoring Verizon in 2025

Both Verizon and AT&T hold considerable potential as they prepare to leverage opportunities in next-generation telecommunications.

However, following AT&T’s extensive rally, its stock appears overvalued, making Verizon a more attractive option for outperforming in 2025. Investors looking for value, high dividend income, and exposure to AI growth themes may find Verizon’s stock an excellent fit for a diversified portfolio.

Should You Invest $1,000 in Verizon Communications Right Now?

Before purchasing stock in Verizon Communications, keep in mind the following:

The Motley Fool Stock Advisor analyst team has identified their top 10 stocks for investors to buy now, and Verizon Communications is not included. The stocks that made the list could deliver substantial returns in the following years.

For context, consider that when Nvidia was listed on April 15, 2005… investing $1,000 at that time would now be worth $666,539!

Stock Advisor offers a clear roadmap for investors, including portfolio-building advice, regular analyst updates, and two new stock picks every month. The Stock Advisor service has more than quadrupled the returns of the S&P 500 since 2002.* Don’t miss the latest top 10 list available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of March 10, 2025

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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.