Tesla(NASDAQ: TSLA) is a leading manufacturer of electric vehicles (EV), doc Meta platform(NASDAQ: META) it is home to social networks such as Facebook, Instagram and WhatsApp. In other words, they are two completely different companies.
But they have one important thing in common: they are betting big on artificial intelligence (AI).
Shares of Tesla and Meta are up more than 60% in 2024, ending the year near record 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.
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 stems from the company’s fully self-driving (FSD) software, which owners of passenger electric vehicles can already use in beta mode.
Tesla CEO Elon Musk believes that autonomy is the future of the automotive industry. In October, the company unveiled its Cybercab robotaxi, which has no pedals or even a steering wheel, as FSD takes over the entire driving process. The company plans to build a transportation network through which Cybercab can autonomously haul passengers and generate revenue 24 hours a day. Since it won’t need a human driver, this revenue stream should have a very high profit margin.
What’s more, consumers will be able to purchase a Cybercab for personal use, or they can purchase a fleet of them and operate their own transportation service using Tesla’s network. Simply put, this new manufacturing platform opens up several new revenue streams for the company, which is why Wedbush Securities analyst Dan Ives believes it could be a $1 trillion opportunity.
But Tesla faces several short-term problems. First, it delivered 1.79 million passenger electric vehicles during 2024, which was a drop of 1.1% compared to 2023. Sales of electric vehicles still account for almost 80% of the company’s total revenue, so it cannot afford to see this business shrink.
That brings me to the second problem — the Cybercab isn’t scheduled for mass production until 2026, which means Tesla’s passenger electric vehicle sales have to impress investors for at least another year.
Moreover, 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 more favorable regulatory environment under the Trump administrationwhich could speed up the approval process, especially since Musk was a major donor to the future president’s election campaign. Musk hopes that FSD will be fully approved this year in at least California and Texas.
However, Tesla shares are trading at lower prices extremely high estimate (more on that later), based entirely on products that aren’t even available yet. This represents a significant risk for investors who buy it now.
But here’s the bottom line: Ark Investment Management’s Cathie Wood thinks 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 high enough risk tolerance to buy them. buy today.
More than 98% of Meta’s revenue comes from selling advertising space to companies on social networks, such as Facebook and Instagram. The formula for success is quite simple: the longer each user spends browsing these platforms each day, the more ads they see and the more revenue Meta earns.
Meta has spent the last few 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 that AI-powered recommendations led to an 8% increase in the time users spent on Facebook year-to-date, and a 6% increase for Instagram.
But that’s just the tip of Meta’s growing AI strategy. The company also launched an AI chatbot called Meta AI in 2023 and it has already amassed 500 million monthly active users. It’s built into each of the company’s apps, where users can ask it questions about almost any topic or prompt it to generate images.
Meta AI is free to use, but I predict that eventually companies will 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 a family of large language models (LLM) from a company called Llama. Unlike the model of leading AI start-ups such as OpenAI, Llama is open source, which allows Meta to collect bug detections and improvements from the entire developer community. With over 600 million downloads, Llama is the most popular open source model family in the world.
On January 29, Meta will report its official financial results for 2024, and the company is likely to tell investors that it spent about $40 billion on building data center infrastructure over the year to advance its AI ambitions. The company plans to launch Llama 4 this year, which Zuckerberg thinks could be the most advanced LLM in the world. This will pave the way for new AI features for Meta’s social networks and new revenue generation opportunities.
Going back to 2025, the Wall Street consensus estimate (provided by Yahoo!) suggests that Meta could post a record $186 billion in revenue and $25.38 in earnings per share. Based on those numbers, the stock looks very attractive right now.
In my opinion, this choice comes down to valuation. As I mentioned earlier, Tesla stock is expensive right now — it trades at a staggering price-to-earnings (P/E) ratio of 108, which makes it three times more expensive than its 32.1 P/E ratio. Nasdaq-100.
Meta stock, on the other hand, trades at a very attractive P/E ratio of just 29.1.
We don’t actually know if Tesla’s business will grow in 2025. Elon Musk he says it will — he thinks passenger EV shipments could grow as much as 30% — but that’s a “show me” story, given the company’s 2024 results. Other than that, I can’t recommend a big bet on Tesla stock at this price based on what power happen with Cybercab and FSD in 2026.
Meta has a better chance of financially benefiting from AI in 2025, as incremental improvements to the recommendation engine itself could immediately lead to more advertising revenue. Combined with the attractive valuation, I think it’s a much safer stock to buy this year.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the listed stocks. The Motley Fool has positions in and recommends Meta Platforms and Tesla. The Motley Fool has a disclosure policy.
