AI Stocks Face Challenges, Yet Nvidia and Meta Present Opportunities

Artificial intelligence (AI) stocks have shown remarkable gains for investors in 2023 and 2024. However, this year is proving more difficult for these companies due to external factors. Investors are currently in a risk-off mode, largely influenced by the recent trade war ignited by U.S. tariffs. This has raised concerns about a potential slowdown in the U.S. economy, contributing to pullbacks in major AI companies’ stock prices despite solid quarterly results.

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Nevertheless, the long-term economic potential of AI suggests that the adoption of this technology will continue to thrive. Market research firm IDC predicts that AI could inject nearly $20 trillion into the global economy by 2030. This outlook indicates that now is an opportune time to consider investing in leading AI firms that are poised to benefit from the growing demand for AI technology.

Two AI powerhouses, Nvidia and Meta Platforms, are demonstrating solid growth and potential for sustained success despite recent stock performance pressures.

Nvidia’s Growth Driven by AI Chip Demand

Nvidia (NASDAQ: NVDA), widely recognized as a leader in AI technology, has seen its shares drop by 17% over the past month, even after reporting strong quarterly results in late February. This has positioned Nvidia’s stock at attractive valuations, with a trailing price-to-earnings (P/E) ratio of 38, which remains reasonable given the impressive growth of its profits.

Nvidia’s forward P/E ratio of 25 is appealing and aligns closely with the forward earnings multiple of the Nasdaq-100, a significant tech-focused index. This perspective suggests Nvidia could be a worthwhile investment at the current price. In its recently concluded fiscal year 2025, Nvidia’s earnings soared by an astounding 130% to $2.99 per share, with revenue exceeding $130.5 billion, more than doubling year-over-year.

The company anticipates continued robust growth; for fiscal 2026 Q1, Nvidia provided revenue guidance of $43 billion, translating to a 65% year-over-year increase. Analysts predict earnings growth of 50% for the current fiscal year, although Nvidia may exceed those expectations due to strong demand for its latest Blackwell data center graphics processing units (GPUs).

In the last quarter, Nvidia sold $11 billion worth of Blackwell processors, surpassing expectations. These GPUs accounted for nearly one-third of the company’s data center revenue, thanks to their versatility in AI applications. With the demand for AI inferencing growing—prompted by large language models like OpenAI’s o1 and DeepSeek’s R1—the need for Blackwell processors is expected to rise.

Nvidia has highlighted that customers deploying Blackwell GPUs have experienced significant reductions in operating costs alongside enhanced performance. Given this, it is likely Nvidia will maintain its dominant position in the AI chip market, where it reportedly holds an impressive 85% market share. Thus, Nvidia remains a strong AI stock to consider for investors, particularly during this current price dip.

Meta Platforms: AI-Fueled Advertising Growth

Meta Platforms (NASDAQ: META) has retreated by 16% recently, making shares more attractive. Currently trading at 26 times trailing earnings, Meta is benefitting from the rapid adoption of its AI-driven advertising tools, helping the company capture a larger portion of the burgeoning digital advertising market.

While the digital advertising market grew by an estimated 12% last year, Meta recorded a remarkable 22% growth in 2024, with total revenue reaching $164 billion. Earnings rose 60% to $23.86 per share, driven by both increased customer spending and effective cost-control strategies.

AI is crucial in strengthening Meta’s position in the advertising space, evidenced by a 14% increase in the average price per ad charged last quarter. Advertisers are willing to invest more in Meta’s tools because AI is enhancing their return on ad spend. In a statement made in January 2024, Meta management noted that its AI capabilities have driven a 32% rise in return on spending for advertisers.

Since then, the company has deployed multiple AI-based features to streamline ad campaign management. This has led to a fourfold increase in the number of advertisers using at least one of Meta’s generative AI ad tools within just six months. CFO Susan Li emphasized this growth in her comments:

“Another way we’re delivering value for advertisers is through increased automation of their ad campaigns with Advantage+. Adoption of Advantage+ shopping campaigns continues to scale with revenues surpassing a $20 billion annual run rate and growing 70% year over year in Q4.”

Meta is likely to capture an increasing share of the digital advertising market over time. According to Grand View Research, the digital ad market could see an annualized growth rate of 15% through the end of the decade, surpassing $1.1 trillion in revenue. Consequently, Meta offers promising prospects for investors looking for undervalued AI stocks poised for future gains.

Seize This Opportunity in Promising Stocks

Have you ever felt you missed your chance to invest in successful companies? Our expert analysts occasionally recommend “Double Down” stocks, indicating firms poised for significant growth. If you’re feeling like you might have missed your opportunity, now is a crucial time to invest before it’s too late. Consider the following:

• Nvidia: If you invested $1,000 when we highlighted it in 2009, you would have $299,728!
• Apple: A $1,000 investment in 2008 would now be worth $39,754!
• Netflix: An investment of $1,000 in 2004 would have grown to $480,061!

Currently, we are issuing “Double Down” alerts for three exceptional companies, and this may be one of the best opportunities you’ll encounter in some time.

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*Stock Advisor returns as of March 14, 2025

Randi Zuckerberg, a former director of market development at Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is on The Motley Fool’s board of directors. Harsh Chauhan does not own any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.

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