It's becoming clear that artificial intelligence (AI) isn't going away. In fact, it looks like this revolutionary technology is only going to become an ever more important part of our daily lives.

This trend has benefited Nvidia (NVDA 1.63%) tremendously. As the leading provider of graphics processing units that power AI applications, it has seen its sales and profits soar, which has helped its share price jump 1,830% in the past five years. Investors certainly want to get in on the action.

But maybe there are better investment opportunities. Should you pass on Nvidia and buy two different AI stocks instead?

Two internet juggernauts

Investors should consider buying shares in Alphabet (GOOGL 1.60%) (GOOG 1.74%) and Meta Platforms (META 1.73%), which are well off recently established all-time highs.

These two companies have massive user bases. Alphabet's various properties, including Maps, Android, YouTube, Gmail, Chrome, and Gogle Search, as well as Meta's Facebook, Instagram, and WhatsApp, are incredibly popular. This broad distribution provides an important advantage, as Alphabet and Meta can constantly introduce new AI features for immediate adoption. Data on usage can be used to drive strategic direction on product enhancements.

Alphabet integrates AI throughout its various offerings. Search has AI overview summaries, YouTube uses AI for content recommendations, and Google Cloud has AI tools that allow customers to build their own applications. Moreover, users have access to Meta's AI features to ask for info or to create images in its different social media apps.

Both businesses generate the majority of their revenue from digital advertising efforts. It makes sense that they also offer AI tools to advertisers that improve targeting capabilities and aim to boost return on marketing spending.

Combined, Alphabet and Meta generated $38 billion in free cash flow in the fourth quarter of 2024. And they ended last year with a cumulative $134 billion of net cash on their balance sheets. This proves that they are in an elite category of financially sound businesses that have the resources to continue investing aggressively in AI efforts.

So, they're great stocks. But is it time to ignore Nvidia?

Nvidia's risks

Nvidia has experienced monster success. But it's not without some risks that investors shouldn't ignore.

One risk is how concentrated the company's customer base is, leading to worrisome dependence on a few accounts. During fiscal 2025, 34% of Nvidia's revenue came from just three customers. It is believed that the top of the client list includes Alphabet, Meta, Amazon, and Microsoft. What's more, these four so-called hyperscalers are all working on developing their own AI chips.

Another risk has to do with potential cyclicality. Nvidia's growth has been remarkable. But it can be worrying when you consider how much money is being spent on AI, to the tune of hundreds of billions of dollars planned for 2025. In a recessionary scenario, businesses could drastically cut their AI-related capital expenditures, which would negatively impact Nvidia's sales.

And of course, we can't forget about competition. Nvidia has a dominant market share compared to rivals Advanced Micro Devices and Intel. However, newcomers could enter the industry, particularly from China, which means that Nvidia must continue operating at the top of its game.

Don't ignore valuation

As of this writing, shares of Nvidia are trading 19% off their peak, which was established in January. Given the company's huge success, some investors might not believe the valuation is steep. Shares trade at a price-to-earnings (P/E) ratio of 41.

But Alphabet and Meta are much cheaper. The former's stock trades at a P/E multiple of 21, while the latter can be purchased for a 26 ratio. On this basis, every other business in the "Magnificent Seven" list of stocks is more expensive.

To be clear, Nvidia's shares could very well continue their ascent, so I wouldn't suggest ignoring it. However, I think Alphabet and Meta provide investors with the best value in the AI space today.