Tesla(NASDAQ: TSLA) is a number one manufacturer of electrical vehicles (EVs), whereas Meta Platforms(NASDAQ: META) is home to social networks like Facebook, Instagram, and WhatsApp. In other words, they’re two completely different corporations.
But they’ve one essential thing in common: They’re betting big on artificial intelligence (AI).
Tesla stock and Meta stock each soared by greater than 60% in 2024, ending the 12 months near record highs. But 2025 is here, and it is time for investors to look forward, so which one is the higher buy now? I feel the reply is obvious.
Image source: Getty Images.
Tesla is one of the vital exciting stories within the AI industry, and its stock has no shortage of bullish price targets from Wall Street analysts. Many of the optimism stems from the corporate’s full self-driving (FSD) software, which owners of its passenger EVs can already use in beta mode.
Tesla CEO Elon Musk believes autonomy is the long run of the automotive industry. The corporate unveiled its Cybercab robotaxi in October, which does not have pedals or perhaps a steering wheel, because FSD will handle the complete driving process. The corporate plans to construct a ride-hailing network where the Cybercab can autonomously haul passengers and earn revenue across the clock. Because it won’t need a human driver, this revenue stream must have a really high profit margin.
Furthermore, consumers will give you the chance to purchase the Cybercab for private use, or they should purchase a fleet of them and operate a ride-hailing service of their very own using Tesla’s network. Simply put, this latest product platform unlocks several latest revenue streams for the corporate, which is why analyst Dan Ives from Wedbush Securities believes it might be a $1 trillion opportunity.
But Tesla faces just a few short-term problems. First, it delivered 1.79 million passenger EVs during 2024, which was a drop of 1.1% in comparison with 2023. EV sales still account for nearly 80% of the corporate’s total revenue, so it might probably’t afford for this business to be shrinking.
That brings me to the second problem — the Cybercab is not scheduled for mass production until 2026, which implies Tesla’s passenger EV sales have to impress investors for at the least one other 12 months.
Furthermore, the corporate’s FSD software doesn’t have regulatory approval for unsupervised use anywhere within the U.S. right away. Investors are speculating that Tesla will face a friendlier regulatory environment under the Trump administration, which could fast-track the approval process, especially since Musk was a significant donor to the incoming president’s election campaign. Musk hopes FSD will likely be fully approved in at the least California and Texas this 12 months.
Still, Tesla stock trades at an extremely high valuation (more on this later), based entirely on products that are not even available yet. That poses a big risk to investors who buy it now.
But here’s the upshot: Cathie Wood’s Ark Investment Management thinks Tesla stock could soar 530% to achieve $2,600 by 2029 if the Cybercab and FSD are successful, so the payoff might be substantial for investors with a high-enough risk tolerance to purchase it today.
Over 98% of Meta’s revenue comes from selling promoting slots to businesses on its social networks, like Facebook and Instagram. The formula for fulfillment is kind of easy: The longer each user spends browsing those platforms every day, the more ads they see, and the more revenue Meta pulls in.
Meta spent the last couple of years constructing AI into its suggestion engine, which learns what content each user likes to see, and shows them more of it to maintain them online somewhat longer. Within the third quarter of 2024 (ended Sept. 30), CEO Mark Zuckerberg said AI-powered recommendations drove an 8% increase within the period of time users spent on Facebook for the 12 months thus far, and a 6% increase for Instagram.
But that is only the tip of Meta’s growing AI strategy. The corporate also launched an AI chatbot called Meta AI in 2023, and it has already amassed 500 million monthly energetic users. It’s embedded in each of the corporate’s apps, where users can ask it questions on almost any topic, or prompt it to generate images.
Meta AI is free to make use of, but I predict businesses will eventually pay money to embed product links into its responses when users ask it a relevant query, which is able to unlock a latest revenue stream for Meta.
Meta AI is powered by the corporate’s family of enormous language models (LLMs) called Llama. Unlike models from leading AI start-ups like OpenAI, Llama is open source, which allows Meta to crowdsource bug detection and enhancements from a complete community of developers. With over 600 million downloads, Llama is the most well-liked family of open-source models on this planet.
Meta will report its official financial results for 2024 on Jan. 29, and the corporate is more likely to tell investors it spent around $40 billion constructing data center infrastructure for the 12 months to further its AI ambitions. The corporate plans to launch Llama 4 this 12 months, which Zuckerberg thinks might be probably the most advanced LLM on this planet. It is going to pave the way in which for brand spanking new AI features for Meta’s social networks, and latest opportunities to generate revenue.
Turning to 2025, Wall Street’s consensus estimate (provided by Yahoo!) suggests Meta could deliver a record $186 billion in revenue, and $25.38 in earnings per share. Based on those figures, its stock looks very attractive right away.
In my opinion, this alternative comes all the way down to valuation. As I touched on, Tesla stock is expensive right away — it trades at an eye-watering price-to-earnings (P/E) ratio of 108, which makes it 3 times costlier than the 32.1 P/E ratio of the Nasdaq-100.
Meta stock, however, trades at a really enticing P/E ratio of just 29.1.
We do not actually know if Tesla’s business will grow in 2025. Elon Musk says it can — he thinks passenger EV deliveries could grow by as much as 30% — however it’s a “show me” story, given the corporate’s 2024 results. Plus, I can not recommend making a big bet on Tesla stock at this price based on what might occur with the Cybercab and FSD in 2026.
Meta has a greater opportunity to financially profit from AI in 2025, because incremental improvements in its suggestion engine alone could immediately drive more promoting revenue. Combined with its attractive valuation, I feel it is a much safer stock to purchase for this 12 months.
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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 Idiot’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Meta Platforms and Tesla. The Motley Idiot has a disclosure policy.
