Telecom giants AT&T (T +1.57%) and Verizon Communications (VZ +1.54%) aren't obvious leaders in the artificial intelligence (AI) revolution, yet their high-speed, low-latency connectivity services play a vital role in the data-intensive AI ecosystem.
Both companies are leveraging their 5G and fiber optic networks to meet the surging demand for edge computing that supports AI workloads. This dynamic, coupled with solid performance in their core wireless businesses, has been a boon for shareholders, with AT&T and Verizon stocks rising by 19% and 13% year to date, respectively.
Even with these large gains, both stocks continue to offer attractive high-yield dividends, making them compelling options for investors seeking income in 2025.
So, which stock is the better buy for your portfolio right now? Let's explore the key factors to consider.
Image source: Getty Images.
The case for AT&T
AT&T has quietly emerged as one of this year's biggest stock market comeback stories, with shares up a remarkable 58% over the past year. The effort to refocus on its core telecom strengths -- by exiting its media ventures with the sale of its DirecTV subsidiary set to close this year -- appears to be paying off.
For the year ended Dec. 31, 2024, mobility segment revenue climbed 3.3%, reflecting a reacceleration in net subscriber additions. An ongoing expansion of its fiber network availability has been a growth driver, with consumer broadband revenue jumping 7.2% in 2024. The market is taking notice.
NYSE: T
Key Data Points
Artificial intelligence (AI) is playing a role in this success, not only as AT&T integrates automation as part of a broader cost-saving initiative, but also as a growth driver, capturing demand for what the company calls the "middle mile infrastructure" connecting the explosion of AI applications to end users. Better-than-expected earnings and free cash flow generation have helped improve its balance sheet through a decline in net debt.
For 2025, AT&T projects further growth and strengthening of financials. That's great news for investors considering the stock's 4.1% yielding dividend. While not yet confirmed, there's likely room for a dividend hike this year. Indeed, AT&T is projecting confidence in its outlook, announcing a new $10 billion share buyback program.
Investors who believe the company has turned the corner toward more sustainable profitable growth have ample reasons to buy and hold the stock.
The case for Verizon Communications
While the recent rally in AT&T stock is impressive, Verizon shares stand out with several key advantages that could make them a better investment. Despite a similar market capitalization for both companies (currently around $195 billion), Verizon is larger by total revenue and more profitable, generating stronger free cash flow for 2024.
Ultimately, Verizon shares benefit from a longer track record of consistency, with the trend of steady growth expected to continue.
NYSE: VZ
Key Data Points
That contrast is particularly important considering Verizon shares are currently trading at a forward price-to-earnings ratio (P/E) of around 10, representing a deep discount compared to AT&T's 13. By this measure, investors may be getting better value with Verizon stock, a dynamic also reflected in its higher dividend yield of 5.8%.
There is also a case to be made that Verizon is the better AI stock with a more defined strategy. The company recently unveiled its Verizon AI Connect solution, enabling businesses to deploy and scale up AI workloads more effectively.
The company is citing partnerships with tech leaders like Alphabet, Meta Platforms, and Nvidia to address evolving AI demands. This development -- coupled with Verizon's pending acquisition of Frontier Communications, which will significantly expand its fiber footprint -- has bolstered its outlook.
VZ PE Ratio (Forward) data by YCharts.
Decision time: I like Verizon in 2025
There's a lot to like about both Verizon and AT&T, since they are set to capitalize on the long-term opportunities in the next generation of telecommunications.
That said, I believe that following AT&T's massive rally, its stock now looks expensive, making Verizon the better pick at this moment to outperform in 2025. For investors seeking a blend of value and high-yield income, along with exposure to AI growth themes, Verizon's stock could make an excellent addition to a diversified portfolio.
