Strategic Tech Investments: Focus on Alphabet and Meta Platforms

As technology companies play an increasingly vital role in the economy, certain leaders are rising above the rest. Investors are keenly interested in these firms because they often deliver impressive returns.

The Nasdaq Composite index is nearing record highs, yet there are still opportunities for long-term investments. If you have $5,000 ready to invest, consider these two tech stocks.

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 »

Leading Technology Firms

First on the list is Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), which CEO Sundar Pichai notes has six products used by over 2 billion people worldwide. Popular platforms like Search, YouTube, and Android underline Alphabet’s dominance.

Next up is Meta Platforms (NASDAQ: META), which includes social media giants Facebook, Instagram, WhatsApp, Messenger, and Threads. Together, these platforms boast an impressive 3.35 billion daily active users, a number that continues to grow.

Both Alphabet and Meta have established themselves as significant players in the digital landscape, with a combined market capitalization of $4.1 trillion. Their services are essential for countless individuals and businesses around the world.

Moreover, these companies are among the most profitable in history. In the last ten years, Alphabet maintained an average operating margin of 26.3%, while Meta outperformed this with 39.4%. Both firms generate substantial free cash flow and enjoy robust financial health.

This strong financial position enables significant investments in artificial intelligence. For 2025, Alphabet plans capital expenditures of $75 billion, while Meta is looking at $62.5 billion (at the midpoint). Few companies can afford such extensive spending.

Advantages of Network Effects

Alphabet’s and Meta’s widespread use is hard to underestimate, and both companies benefit significantly from powerful network effects. This advantage helps them fend off competitors, whether established tech giants or start-ups.

As data increases exponentially, users seek ways to navigate this information overload. Google Search is invaluable for this purpose. Improved algorithms enhance the service’s usefulness, creating a positive feedback loop.

Advertisers can also target audiences more effectively as the system becomes more robust with growth.

YouTube benefits similarly; with billions of users, content creators flock to the platform, driving even more viewer engagement.

Meta’s network effects are equally compelling. Users want to connect on Facebook or Instagram because their peers are already there. The potential for connections grows exponentially, and this engagement is monetized through advertising.

While anyone with funding and programming skills could create a new social media app, replicating the scale of Meta’s platforms is nearly impossible.

Valuation Insights

Despite their strengths, Alphabet and Meta are both attractively valued. They rank among the cheapest stocks in the “Magnificent Seven.”

Currently, Alphabet shares are trading at a forward P/E ratio of 20.8, while Meta shares are at 28.5. Both companies are projected to achieve double-digit annualized earnings-per-share growth over the next three years, making a $2,500 investment in each a wise choice.

Take Advantage of a Unique Investment Opportunity

Have you ever felt you missed out on investing in successful stocks? Opportunities like this can be rare.

Occasionally, our team of analysts issues a “Double Down” stock recommendation for companies they see poised for growth. If you’re worried you missed your chance to invest, now may be the opportune moment.

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $340,048!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,908!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $554,019!*

At present, we’re issuing “Double Down” alerts for three incredible companies, and another chance like this may not come soon.

Learn more »

*Stock Advisor returns as of February 3, 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. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. 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.