Tesla or Meta Platforms stock?

Tesla (NASDAQ: TSLA) is a leading electric vehicle (EV) manufacturer, while Metaplatforms (NASDAQ: META) it is the home of social networks like Facebook, Instagram and WhatsApp. In other words, they are two completely different companies.

But they have one important thing in common: they’re betting big on artificial intelligence (AI).

Shares of Tesla and Meta soared more than 60% in 2024, ending the year near all-time highs. But 2025 is here, and it’s time for investors to look ahead, so what’s the best buy now? I think the answer is clear.

A blue Tesla driving on an open road. — Image source: Getty Images.

Tesla is one of the most exciting stories in the world AI industryand its stock has no shortage of bullish price targets from Wall Street analysts. Most of the optimism comes from the company’s full self-driving software (FSD), which owners of its electric passenger vehicles can already use in beta mode.

Tesla CEO Elon Musk believes that autonomy is the future of the auto industry. The company unveiled its Cybercab robotaxi in October, which doesn’t have pedals or even a steering wheel, because FSD will take care of the entire driving process. The company plans to build a transportation network where the Cybercab can autonomously transport passengers and earn revenue around the clock. Since you won’t need a human driver, this revenue stream should have a very high profit margin.

In addition, consumers will be able to purchase the Cybercab for personal use, or they can purchase a fleet of them and operate their own transportation service through Tesla’s network. Simply put, this new product platform unlocks several new revenue streams for the company, which is why Wedbush Securities analyst Dan Ives believes it could be a trillion-dollar opportunity.

But Tesla faces some near-term problems. First, it delivered 1.79 million electric passenger vehicles during 2024, which was a to drop of 1.1% from 2023. Electric vehicle sales still account for nearly 80% of the company’s total revenue, so this business cannot be allowed to shrink.

That brings me to the second problem: The Cybercab isn’t scheduled for mass production until 2026, meaning Tesla’s passenger electric vehicle sales have to impress investors for at least another year.

Additionally, the company’s FSD software does not currently have regulatory approval for unsupervised use anywhere in the US. Investors speculate that Tesla will face a friendlier regulatory environment under the Trump administrationwhich could speed up the approval process, especially since Musk was a major donor to the new president’s election campaign. Musk expects FSD to be fully approved in at least California and Texas this year.

Still, Tesla shares are trading at one extremely high rating (more on that later), based entirely on products that are not yet available. This poses a significant risk to investors who buy it now.

But here’s the bottom line: Cathie Wood’s Ark Investment Management believes Tesla shares could rise 530% to $2,600 by 2029 if Cybercab and FSD are successful, so the payoff could be substantial for investors with a tolerance at risk high enough to buy it today.

More than 98% of Meta’s revenue comes from selling advertising space to companies on its social networks, such as Facebook and Instagram. The formula for success is quite simple: the more time each user spends browsing these platforms each day, the more ads they will see and the more revenue Meta will earn.

Meta spent the last two years building AI into its recommendation engine, which learns what content each user likes to see and shows them more to keep them online a little longer. In the third quarter of 2024 (ended September 30), CEO Mark Zuckerberg said AI-based recommendations led to an 8% increase in the amount of time users spent on Facebook in the year to to date and a 6% increase for Instagram.

But this is just the tip of Meta’s growing AI strategy. The company also launched an AI chatbot called Meta AI in 2023 and has already amassed 500 million monthly active users. It’s integrated into each of the company’s apps, where users can ask it questions about almost any topic or ask it to generate images.

Meta AI is free to use, but I predict that companies will eventually pay money to embed product links in their answers when users ask it a relevant question, unlocking a new revenue stream for Meta.

Meta AI is powered by the company’s family of large language models (LLMs) called Llama. Unlike the models of leading AI startups like OpenAI, Llama is open source, which allows Meta to bring bug detection and improvements closer to an entire developer community. With over 600 million downloads, Llama is the world’s most popular open source model family.

Meta will report its official financial results for 2024 on January 29, and the company is likely to tell investors that it spent about $40 billion on building data center infrastructure during the year to fuel the their AI ambitions. The company plans to release Llama 4 this year, which Zuckerberg believes could be the world’s most advanced LLM. It will pave the way for new AI features for Meta’s social networks and new opportunities to generate revenue.

Looking to 2025, the Wall Street consensus estimate (provided by Yahoo!) suggests Meta could generate a record $186 billion in revenue and $25.38 in earnings per share. Based on these numbers, its stock looks very attractive right now.

In my opinion, this choice comes down to valuation. As I mentioned, Tesla stock is expensive right now: it trades at a price-to-earnings (P/E) ratio of 108, which makes it three times more expensive than the 32.1 P/E ratio of Nasdaq-100.

Meta stock, on the other hand, is trading at a very attractive P/E ratio of just 29.1.

TSLA PE Ratio Chart — TSLA PE ratio data for YCharts

We don’t actually know if Tesla’s business will grow in 2025. Elon Musk he says will, believes that passenger electric vehicle deliveries could grow as much as 30%, but it’s a “show me” story, given the company’s results in 2024. Also, I can’t recommend making a big bet on Tesla stock at this price depending on what could happen with Cybercab and FSD in 2026.

Meta has a better chance to benefit financially from AI in 2025, as incremental improvements to its recommendation engine could immediately generate more ad revenue. Combined with its attractive valuation, I think it’s a much safer stock to buy for this year.

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Randi Zuckerberg, former CMO and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anthony DiPizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Tesla. The Motley Fool has one disclosure policy.

Better to buy in 2025: Tesla Stock or Meta Platforms Stock? was originally published by The Motley Fool

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