Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) and Meta Platforms (NASDAQ: META) are leaders of digital innovation that have created massive shareholder wealth over the past decade.

Through distinct strategies and different areas of market focus, the core business for both tech giants is centered on online advertising. This year, new artificial intelligence (AI) capabilities have fueled a new round of growth, propelling the two stocks to a record high.

Let’s discuss whether Alphabet or Meta Platforms is the better buy right now.

Image source: Getty Images.

The case for Alphabet

Alphabet, known for its Google subsidiary, is recognized as operationally diversified, with multiple monetized products and services. From its flagship internet search and browser, the company also operates a major cloud computing segment and the YouTube video-sharing platform. Alphabet even owns the autonomous driving tech start-up Waymo, highlighting an ongoing effort to stay on the cutting edge of technology.

That extensive reach is a major advantage for Alphabet, as it leverages product synergies with a worldwide audience as a powerful advertising network. The company is investing heavily in AI, which has added to its operating and financial momentum. By refining search algorithms to enhance ad conversion rates, the impact on company financials is evident.

In the third quarter, Alphabet’s revenue increased by 15% year over year, while earnings per share (EPS) accelerated 37%. Management is citing a strong response by advertising partners and consumer users to its AI tools to project optimism that the trends will continue. Shares of Alphabet have climbed by 22% this year, supported by that positive growth outlook.

Internet peer Meta Platforms is also putting up some impressive numbers, but as an investment idea right now, Alphabet has another key advantage. Based on the average of Wall Street analyst estimates, shares of Alphabet are trading at 22 times its full-year consensus EPS as a forward price-to-earnings (P/E) ratio. This level represents a discount to Meta trading at a forward P/E of 25.

Investors looking for a bargain in big tech stocks should pick Alphabet, as it appears to offer better value.

GOOGL PE Ratio (Forward) data by YCharts

The case for Meta Platforms

Shares of Meta Platforms have outperformed, up an impressive 60% in 2024, at the time of this writing. While lacking the same breadth of diversity in digital properties as Alphabet, Meta’s strength is its clear leadership in social media, which it manages to monetize very effectively.

The company’s family of apps, including Facebook, Instagram, Threads, and WhatsApp, boasts a combined 3.3 billion daily active users, creating a significant advantage for Meta in data collection. The highly personal level of user engagement in the ecosystem offers uniquely attractive advertising opportunities that are now AI-optimized to improve effectiveness.

Compared to Alphabet, Meta is generating stronger growth this year. In the last reported third quarter, revenue was up by 19% from last year, benefiting from AI-driven ad performance gains in a resilient macroeconomic backdrop.

According to analyst estimates, Meta’s full-year EPS is forecast to grow 52% from 2023, higher than the 38% consensus expectation for Alphabet. This spread helps justify Meta’s valuation premium as a currently more profitable company.

That being said, the case for Meta being the better stock likely comes down to aspects outside the headline numbers. The potential that the company develops a major new revenue driver, or brings its vision of the metaverse into existence, could be a game changer long term.

Investors who are confident in Meta’s ability to consolidate its leadership in social media and AI have plenty of reasons to consider buying the stock.

Decision time: A runway for Meta Platforms stock

It’s a tough task to choose between Alphabet and Meta, which are both great companies with overall solid fundamentals.

If forced to pick just one, I’d give the edge to Meta Platforms, considering some renewed regulatory uncertainty and increased antitrust scrutiny, particularly toward Alphabet. Reports that the U.S. Department of Justice may force the company to break up and sell its Chrome browser unit, precisely because it’s too dominant, is a risk for investors to balance.

While nothing has been confirmed, those types of headlines can keep shares of Alphabet volatile. In the meantime, Meta Platforms may be the better stock, with a clearer runway to reward shareholders over the long run.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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. Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.