The role of artificial intelligence (AI) is becoming increasingly significant in our lives. This transformative technology is not just a passing trend, but is likely to become integral to our daily routines.

Nvidia(NASDAQ: NVDA) has greatly benefited from this trend. As a leading supplier of graphics processing units for AI applications, the company has enjoyed soaring sales and profits, pushing its share price up by 1,830% over the past five years. Investors are eager to tap into this growth.

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However, potential investors might want to consider alternative opportunities. Is it advisable to bypass Nvidia in favor of different AI stocks?

Two Prominent Tech Companies

Investors should take a closer look at Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) and Meta Platforms (NASDAQ: META), which are currently trading below their previous all-time highs.

Both companies boast extensive user bases. Alphabet’s portfolio includes popular platforms like Google Search, YouTube, Maps, Android, Gmail, and Chrome, while Meta owns Facebook, Instagram, and WhatsApp. This broad accessibility gives both companies a significant edge, allowing them to seamlessly integrate new AI features that can be widely adopted. They can leverage user data to enhance product development strategies.

Alphabet incorporates AI across its offerings. For instance, new AI-enabled summaries enhance Google Search results, while YouTube utilizes AI for content recommendations. Google Cloud provides AI tools that empower clients to create custom applications. Additionally, users benefit from Meta’s AI functionalities to gather information or produce images across its social media platforms.

Both Alphabet and Meta primarily drive their revenue through digital advertising. Therefore, it is logical for them to provide AI solutions that improve ad targeting and aim to enhance returns on marketing investments.

In the fourth quarter of 2024, Alphabet and Meta combined reported a generous $38 billion in free cash flow, culminating in a total of $134 billion in net cash on their balance sheets. This positions them in a prestigious class of financially robust companies, enabling both to continue aggressive investments in AI development.

These companies appear to be solid investment choices. But should Nvidia be ignored?

Assessing Nvidia’s Risks

While Nvidia has enjoyed significant success, it faces certain risks that investors should consider carefully.

One major concern involves the concentration of its customer base, which raises dependency risks. In fiscal 2025, 34% of Nvidia’s revenue came from only three clients, likely including Alphabet, Meta, Amazon, and Microsoft, collectively known as hyperscalers. Notably, these companies are also developing their own AI chips.

Another risk centers around potential economic cyclicality. Although Nvidia has exhibited stunning growth, concerns arise regarding the scale of AI-related expenditure projected for 2025, amounting to hundreds of billions. In a downturn, firms could significantly reduce their AI budgets, adversely affecting Nvidia’s revenue stream.

Lastly, competitive pressures must not be overlooked. Nvidia commands a large market share compared to competitors like Advanced Micro Devices and Intel. Nevertheless, the possibility of new entrants, especially from China, indicates that Nvidia will need to sustain its competitive edge.

Valuation Considerations

Currently, Nvidia’s shares aretrading 19% below their January peak. Despite the company’s remarkable achievements, some investors may find its valuation to be high, with shares operating at a price-to-earnings (P/E) ratio of 41.

In contrast, Alphabet and Meta offer more attractive price points. Alphabet’s shares trade at a P/E multiple of 21, while Meta’s valuation stands at a P/E of 26. Relative to the broader “Magnificent Seven,” every other stock in this group is priced higher.

Nvidia’s shares could very well continue to rise, so it’s not advisable to disregard it entirely. Nonetheless, Alphabet and Meta appear to represent the most compelling value in the AI investment landscape at present.

Should you invest $1,000 in Meta Platforms right now?

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Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board of directors. Randi Zuckerberg, a former market development director for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is also a board member. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member as well. Neil Patel and his clients currently hold no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Intel, Meta Platforms, Microsoft, and Nvidia. The Motley Fool also recommends options trades involving Microsoft and Intel. The Motley Fool has a standard disclosure policy.

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