How Tariffs Impact AI Investments and Key Stocks to Watch
Artificial intelligence (AI) investments face challenges from tariffs that may be imposed on components imported into the U.S. Additionally, reduced consumer demand could negatively impact cash flows directed into AI initiatives.
Investors should consider holding certain stocks, which are expected to thrive in the long term despite tariff uncertainties. These stocks present solid opportunities for purchase now, with a strategy focused on long-term gains over three to five years.
Meta Platforms: A Resilient Investment
Meta Platforms (NASDAQ: META) derives 98% of its revenue from advertising on platforms like Facebook and Instagram. The company leverages its strong cash flow to invest significantly in AI, aiming to enhance its advertising capabilities and develop new technologies.
While tariffs pose potential economic headwinds that could affect advertising revenues, any impact is likely to be temporary. Analysts believe that Meta’s core business will remain robust over the next three to five years, mitigating any immediate tariff-related issues.
Interesting developments in AI, such as Meta’s anticipated AI glasses, could play a vital role in the company’s growth trajectory. Current market conditions suggest that acquiring Meta shares is a sound strategy, regardless of upcoming tariff changes.
Despite the market’s recent recovery, Meta remains attractively priced. While earlier investment would have capitalized on lower prices, it continues to trade towards the lower end of its annual range.
META PE Ratio data by YCharts
Nvidia: A Key Player in AI Growth
Nvidia (NASDAQ: NVDA) could seem an unexpected choice, given its reliance on imported components. However, the company is shifting towards domestic production, with next-generation Blackwell GPUs set to be made in the U.S. by 2026. This means they will avoid tariffs associated with imported goods.
The demand for Nvidia’s GPUs is projected to remain high as AI developers continue to expand data center capabilities. As older GPUs wear out, there will be a continued need for replacements. Third-party estimates indicate that data center capital expenditures will rise from $400 billion in 2024 to $1 trillion by 2028, further supporting Nvidia’s upward momentum.
Even though Nvidia’s stock price has bounced back significantly, it has not yet regained its previous highs from most of 2024. At a valuation of 31 times forward earnings, Nvidia is not the cheapest option, but strong market fundamentals suggest now is a prudent time to invest.
NVDA PE Ratio (Forward) data by YCharts
Investment Considerations for Meta Platforms
Before deciding to invest in Meta Platforms, it’s essential to consider additional insights:
Current analysis indicates that while Meta Platforms has appeal, it was not included among the top 10 stocks recommended by the analyst team of The Motley Fool—a list expected to yield substantial returns.
Historical performance reveals that stocks like Netflix and Nvidia, which were featured in previous top picks, led to significant investment gains over time. For example, if you invested $1,000 in Netflix in December 2004, it would have grown to over $642,000 by now. Similarly, an investment in Nvidia in April 2005 would have yielded nearly $830,000.
As a comparison point, Stock Advisor has delivered a total average return of 975%, significantly outperforming the S&P 500’s 172% return.
Randi Zuckerberg, a former director at Facebook, is on The Motley Fool’s board. Keithen Drury owns shares in Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool holds positions in and recommends Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
