As Artificial Intelligence (AI) Stocks Fall, Investors Should Consider Buying More of These 2 Powerhouses

Artificial intelligence (AI) stocks generally delivered outstanding gains to investors in 2023 and 2024, but due to factors outside their control, this year is turning out to be a more challenging one for them.

Investors have shifted into risk-off mode of late due to the nascent trade war that was triggered by U.S. tariffs, which has many people concerned that a slowdown in the U.S. economy is imminent. The rising uncertainty and fear about the outlook explains why major AI companies have witnessed stock pullbacks of late even as they've been posting solid quarterly results.

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However, the long-term economic potential of AI means that the proliferation of this technology is likely to continue. Market research firm IDC predicts that AI could add nearly $20 trillion to the global economy by 2030. This is the reason why it may be a good idea to buy shares of some top AI players benefiting from the technology's growing adoption right now.

These two beaten-down AI powerhouses have been growing at a healthy pace and have the potential to sustain their impressive growth in the long run.

AI chip demand continues to drive Nvidia's remarkable growth

Shares of AI poster child Nvidia (NASDAQ: NVDA) are down 17% in the last month, even as the company reported solid quarterly results in late February. That has left Nvidia trading at attractive valuations. Its trailing price-to-earnings (P/E) ratio stands at 38, which isn't all that expensive considering the terrific pace at which its bottom line is growing.

Nvidia's forward P/E ratio of 25 is even more attractive, and is almost in line with the forward earnings multiple of the Nasdaq-100 (a tech-heavy index that can serve as a useful proxy for the broader tech sector). In that light, Nvidia looks like a bargain buy at these levels. The company's earnings shot up by a remarkable 130% to $2.99 per share in its recently concluded fiscal 2025, while revenue more than doubled to $130.5 billion.

Moreover, Nvidia expects to keep growing at a remarkable pace despite its massive scale. The company's fiscal 2026 Q1 revenue guidance of $43 billion would translate into a year-over-year increase of 65%. Analysts are expecting Nvidia to clock 50% earnings growth in the current fiscal year.

However, Nvidia has the ability to outpace those expectations as the demand for its latest generation of Blackwell data center graphics processing units (GPUs) remains robust. The company sold $11 billion worth of Blackwell processors in its fiscal fourth quarter, which was higher than anticipated. Blackwell GPUs accounted for nearly a third of Nvidia's data center revenue last quarter, and they are set to move the needle in a bigger way for the company thanks to their versatility.

Nvidia points out that the Blackwell GPUs are far more capable than its previous-generation Hopper processors at AI inferencing -- the process of putting AI models to work once they are trained. As the demand for AI inferencing increases with the debuts of large language models such as OpenAI's o1 and DeepSeek's R1, so too is the demand for Blackwell processors.

More importantly, Nvidia points out that its customers have been able to significantly lower their operating costs and boost performance simultaneously by deploying Blackwell GPUs. With all this in mind, it won't be surprising if Nvidia maintains its stranglehold over the AI chip space, where it reportedly commands an impressive 85% market share.

In the end, it can be concluded that Nvidia remains a top AI stock as its days of outstanding growth are here to stay. Investors would be well advised to buy it while its price is beaten down.

AI-powered advertising is a key catalyst for Meta Platforms

Meta Platforms (NASDAQ: META) stock has retreated 16% in the past month, making it a no-brainer buy. After all, it is now trading at 26 times trailing earnings even as fast-growing demand for its AI-based advertising tools is helping it corner a bigger share of a huge end-market opportunity.

The digital advertising market grew by an estimated 12% last year. Meta, however, recorded much stronger growth of 22% in 2024 and generated $164 billion in revenue. Its earnings, meanwhile, grew by 60% to $23.86 per share, driven by a combination of higher spending by customers and its own cost-control initiatives.

AI is playing a key role in helping Meta win a bigger share of its customers' marketing budgets. This is evident from the 14% year-over-year increase in the average price per ad that Meta charged last quarter. A big reason why advertisers are willing to spend more money on Meta's advertising tools is because they are getting stronger returns on that spending thanks to AI.

Meta management asserted in January 2024 that its AI tools were driving a 32% increase in return on spending for advertisers. The social media giant has rolled out several AI-based features since then to help advertisers automate the creation, deployment, and optimization of ad campaigns. More importantly, it is continuing to add new AI features. So, it is not surprising to see why there has been a sharp jump in the adoption of Meta's AI ad tools of late.

Management remarked on the company's January 2025 earnings conference call that "more than 4 million advertisers are now using at least one of our generative AI ad creative tools." That's a 4x jump in a period of just six months. This is resulting in financial gains for Meta as well. According to CFO Susan Li:

Another way we're delivering value for advertisers is through increased automation of their ad campaigns with Advantage+. Adoption of Advantage+ shopping campaigns continues to scale with revenues surpassing a $20 billion annual run rate and growing 70% year over year in Q4.

So, Meta seems on track to win a bigger share of the digital ad market in the long run. Grand View Research projects that the digital ad market could clock 15% annualized growth through the end of the decade to more than $1.1 trillion in annual revenue. Meta, therefore, has room to keep growing at a healthy pace, making it an ideal bet for investors looking to buy a cheaply valued AI stock that could fly higher in the long run.

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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 Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.