Roughly three decades ago, the internet began going mainstream and completely changed the way businesses operate and market themselves. Although it took years for the internet to reshape corporate America, this technology ultimately lifted the long-term growth arc for businesses.
Wall Street and investors have been waiting a long time for another game-changing innovation to come along that could rival what the internet has done for businesses. After much waiting, artificial intelligence (AI) appears to have answered the call.
Giving software and systems the tools to make split-second decisions without the need for human oversight, as well as empowering these systems to become more efficient at their tasks over time, is an innovation the analysts at PwC believe can add $15.7 trillion to the global economy by 2030. Even if this estimate is only remotely in the ballpark, it would mean dozens, or even hundreds, of companies are going to be winners.
Image source: Getty Images.
We're, arguably, in the early innings of the AI revolution, which means bargains still abound among AI stocks. But while Wall Street darlings Nvidia (NVDA 3.62%) and Palantir Technologies (PLTR 6.53%) have been the early favorites for investors, there's an even smarter buy currently lurking in plain sight.
Nvidia and Palantir are susceptible to historical headwinds
On paper, it's hard to argue against owning shares of Nvidia and Palantir. The former is the first company to surpass the $5 trillion market cap plateau, and the latter has seen its shares rally by close to 2,900% since the end of 2022.
Investors have been enamored with Nvidia's command of the graphics processing unit (GPU) market. By some estimates, Nvidia's GPUs account for a greater than 90% share of what's powering AI-accelerated data centers. Further, CEO Jensen Huang is overseeing the launch of a new advanced chip each year, which makes it highly unlikely than any external competitors will be able to match or surpass Nvidia's hardware on a compute basis anytime soon.
NASDAQ: NVDA
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As for Palantir, the beauty of its operating model is its irreplaceability. Its AI-fueled Gotham software-as-a-service platform is used by the U.S. government and its allies to plan and oversee military operations. There isn't a one-for-one replacement for this service, which leads to steady double-digit sales growth and multiyear government contracts.
However, despite these competitive advantages, neither stock is a smart buy right now due to historical headwinds.
For instance, every next-big-thing technology and hyped trend since (and including) the advent of the internet has worked its way through a bubble-bursting event early in its expansion process. This is the result of investors constantly overestimating the adoption rate, utility, and product/service optimization of new technologies and trends.
NASDAQ: PLTR
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Since the internet arrived, we've witnessed bubbles also burst for genome decoding, nanotechnology, 3D printing, blockchain technology, and the metaverse, to name a few key trends. It takes time for all technologies to mature, and this should hold true for artificial intelligence. If and when the AI bubble bursts, it would only be logical that its greatest beneficiaries, Nvidia and Palantir, feel the pain.
The other historical headwind for both companies is their valuation. Though value is subjective, the price-to-sales (P/S) ratio makes it abundantly clear how pricey both companies are.
Prior to the dot-com bubble bursting, most leading internet stocks had topped out with a trailing 12-month P/S ratio in the range of 30 to 40. While this isn't a hardline ceiling, it has served as a fairly steady marker to establish bubble stocks over the last three decades. Nvidia and Palantir have respective P/S ratios of 29 and 125, as of the closing bell on Nov. 11. History tells us, plainly, these premiums aren't sustainable over the long run.
Image source: Getty Images.
This is the genius stock to buy to take advantage of the AI revolution
The smartest way to take advantage of the long-term growth ceiling of AI is to own shares of an inexpensive business with a rock-solid existing foundation that wouldn't be meaningfully impacted if an AI bubble were to form and burst. The "magnificent" stock that fits the mold is none other than social media titan Meta Platforms (META +0.14%).
One of the factors that makes Meta special is that an overwhelming majority of its existing revenue isn't necessarily tied to the ebbs and flows of AI hype. It's the parent company of popular social media destinations Facebook, Instagram, WhatsApp, Threads, and Facebook Messenger, among others, and it lured an average of 3.54 billion daily active users to its family of apps during the month of September.
No other social media company comes particularly close to matching 3.54 billion pairs of eyeballs on a monthly basis, which affords Meta substantial ad-pricing power in most economic climates.
What's more, ad-driven businesses are highly cyclical, which actually works in favor of the company and Meta Platforms' investors. Since the end of World War II in September 1945, the average U.S. recession has lasted for roughly 10 months. In comparison, the typical economic expansion has stuck around for about five years. This implies that Meta's ad business, which currently accounts for 98% of net sales, is going to spend far more time in the sun than under grey clouds.
NASDAQ: META
Key Data Points
Make no mistake about it, Mark Zuckerberg's company is using AI to improve sales. It's incorporating generative AI solutions for advertising clients as a way to tailor static and video messages to specific users and improve click-through rates. If an AI bubble forms and bursts, there isn't any direct negative impact to Meta since it's an industry leader relying on AI solutions as an application.
Additionally, Meta is sitting on more than $44.4 billion in cash, cash equivalents, and marketable securities as of the end of September. It's also generated close to $79.6 billion in cash from its operating activities through the first nine months of 2025. The point being that Meta is one of the very few public companies that has the luxury of continuing to invest aggressively in high-growth initiatives, even if those investments are years away from yielding significant returns.
The final piece of the puzzle is Meta's valuation. As of Nov. 11, Meta was valued at a forward-year price-to-earnings (P/E) ratio of 21, which is right in line with its five-year average. However, its sales growth rate has meaningfully picked up to around 20% per year. Among the members of the "Magnificent Seven," none has a lower forward P/E ratio than Meta Platforms.
The savviest way to take advantage of the $15.7 trillion AI opportunity is to ensure Meta Platforms' stock is part of your portfolio.
