Should You Consider AI Stocks Instead of Tesla Right Now?

Tesla (TSLA -4.43%) has been experiencing significant fluctuations lately.

Following the election of President Donald Trump in November, shares of the electric vehicle (EV) manufacturer surged, largely due to CEO Elon Musk's close alignment with the president during the campaign. Investors were optimistic, believing that a positive relationship with the administration could benefit Tesla.

However, since Trump's inauguration, Musk has become a focal point of controversy, primarily due to layoffs and cost-cutting measures initiated by the Department of Government Efficiency (DOGE), alongside his various political remarks. This tumult has shown signs of impacting Tesla's operations, particularly highlighted by a 45% drop in January vehicle registrations in Europe, even as the overall EV market experienced a 37% increase.

As illustrated in the chart below, Tesla's stock nearly doubled in value shortly after the election but has since given up nearly all those gains.

For those looking to invest in artificial intelligence (AI) stocks, there may be more promising options available. Here are two to consider.

The Trade Desk

The Trade Desk (TTD 0.64%) has established itself as a leader in advertising technology over the past ten years. As an independent demand-side platform (DSP), it assists ad agencies and brands in optimizing their advertising drives, increasingly utilizing AI to enhance its offerings.

The Trade Desk's new AI initiative, Kokai, leverages deep learning algorithms throughout the buying process and processes data from over 13 million advertising impressions each second. The company has acknowledged some challenges with the Kokai rollout in its latest earnings report, leading to a drop in stock price after it missed its revenue targets. Although the transition from their previous platform, Solimar, to Kokai has been slower than expected, The Trade Desk is aiming to complete all customer transitions by the end of this year.

Currently, the downturn in The Trade Desk's stock price presents an attractive buying chance, with shares down nearly 50% from their peak in the fall. Despite the disappointing fourth-quarter figures, the firm still recorded a 22% revenue increase to $741 million and saw adjusted earnings per share rise by 44% to $0.59. With such growth and ongoing AI innovations fortifying its competitive position, the stock is poised for recovery throughout 2025.

Microsoft

Another strong AI stock trading at a discount is Microsoft (MSFT 0.03%). Recognized as an early leader in AI through its collaboration with OpenAI, Microsoft’s stock had an initial surge but has since lagged behind the broader market. The stock has declined over the past year, facing skepticism over rising capital expenditures, and its valuation concerns were growing.

However, with shares now nearly 20% lower than their peak, Microsoft appears more attractively priced, boasting a price-to-earnings ratio of 31.5, which is only slightly above that of the S&P 500.

Microsoft continues showing solid growth and its extensive portfolio of services provides substantial competitive advantages. Unlike many other megatech firms, Microsoft's diversity is noteworthy, spanning Windows, the Office suite, software products including Teams and Dynamics, gaming with Xbox, and the LinkedIn social platform, along with its Azure cloud infrastructure, which is the core of its Intelligent Cloud division and saw a 19% growth in the latest quarter.

In total, Microsoft's revenue grew by 12%, and its operating income rose by 17%, alleviating concerns regarding its growth potential. The company appears well-positioned to gain from developments in AI, thanks to its broad range of businesses that can leverage AI advancements. As a key partner of OpenAI, Microsoft has been launching numerous AI tools, including Copilot, and is also involved in the large-scale Stargate Project, which aims to invest up to $500 billion in AI infrastructure.

If the AI boom fulfills investor expectations, Microsoft is likely to emerge as a significant beneficiary.

Interests in The Trade Desk are held by Jeremy Bowman. The Motley Fool has positions in and endorses Microsoft, Tesla, and The Trade Desk. The Motley Fool advises options including long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. For a complete disclosure, refer to their policies.

investing, stocks, AI