1 Scorching-Hot Trillion-Dollar Artificial Intelligence (AI) Stock to Buy in September, and 1 Highflier That’s Worth Avoiding

AI's trillion-dollar revolution hits Wall Street—one stock surges while another teeters on hype.

The AI Gold Rush: Separating Genius From Gimmickry

Forget picking winners based on press releases and CEO charisma. The real money flows to infrastructure—the picks and shovels of the AI revolution. One trillion-dollar player dominates compute power while another rides speculative fumes.

The Compute Colossus: Cloud, Chips, and Cash Flow

This isn't about chatbots writing poetry—it's about the brutal economics of training models. One company controls the infrastructure stack from silicon to datacenter, locking in enterprise clients who can't afford downtime. Their moat? Actual revenue, not hypothetical use cases.

The Hype Cycle Casualty: When Valuation Detaches From Reality

Meanwhile, another 'disruptor' burns cash faster than GPT-4 generates text. No path to profitability? No problem—until the music stops. Remember: in bull markets, everyone's a genius. In bear markets, we see who's wearing algorithmic swim trunks.

Smart money bets on the house, not the gambler. And Wall Street's favorite casino just upgraded its servers.

Image source: Getty Images.

This trillion-dollar artificial intelligence stock is truly "magnificent"

Only 11 public companies (10 of which trade in the U.S.) have ever hit the psychological trillion-dollar market cap plateau. Seven of these businesses are members of the "Magnificent Seven," all of which are expected to lean into AI hardware or applications to accelerate their respective growth rates.

But among these seven market-leading businesses, social media giant(META 1.52%) stands out as truly magnificent.

Shares of Meta have soared more than 700% since hitting their 2022 bear market low in early November 2022. While such a monstrous gain might keep some folks planted firmly on the sideline, Meta finds itself perfectly positioned to benefit from a growing global economy and the evolution of AI.

First and foremost, Meta is a social media company. Despite CEO Mark Zuckerberg's hefty investments in AI-data center infrastructure, almost 98% of the company's net sales derive from advertising on its family of apps. These popular destinations, which include Facebook, WhatsApp, Instagram, Threads, and Facebook Messenger, lured an average of 3.48 billion daily users in June. With no other social platform remotely close to this number of daily visitors, Meta enjoys strong demand and pricing power for ad placement on its apps.

This also ties Meta to the health of the U.S. and global economy. Even though recessions are normal, healthy, and inevitable aspects of the economic cycle, they resolve rather quickly. In the eight decades since World War II ended, the average U.S. recession has resolved in just 10 months. In comparison, the typical economic expansion has stuck around for five years. These extended periods of economic growth favor ad-driven operating models.

What concurrently makes Meta Platforms such an exciting AI stock is that it's already reaping the rewards of applying AI solutions to its advertising platform. The company is giving its ad clients access to generative AI solutions so they can tailor static and video messages to specific users. With the assumption that this improves click-through rates for advertisers, it's only going to lift Meta's ad-pricing power.

Furthermore, Meta has quite the cash cushion on its balance sheet. It closed out the June-ending quarter with a little over $47 billion in cash, cash equivalents, and marketable securities, and is pacing more than $99 billion in net cash generated from its operating activities in 2025. Zuckerberg's company has the luxury of investing in higher-growth initiatives and waiting until the time is right to monetize them. This includes Zuckerberg's ambitious spending on metaverse solutions.

Lastly, Meta's valuation remains reasonable given the opportunity in front of the company. Shares can be picked up by opportunistic investors right now for less than 25 times forward-year earnings, which is a bargain considering Meta's historically conservative profit guidance and its sustained mid- to high-teens sales growth rate.

Image source: Getty Images.

This groundbreaking AI stock is pushing boundaries in all the wrong ways

At the other end of the spectrum is an artificial intelligence stock that's actually outperformed Meta in the return column since 2023 began. I'm talking about AI-data mining specialist(PLTR 0.79%).

Before going any further, let's make one thing clear: Palantir is a rock-solid and profitable company. Its allure is that both of its Core platforms, Gotham and Foundry, aren't replicable at scale. Gotham is the trusted platform of federal governments planning and overseeing military missions. As for Foundry, it's a rapidly growing subscription-based platform that helps businesses make sense of their data and streamline their operations.

Palantir has pretty consistently crushed the loftiest Wall Street growth forecasts with ease. Net sales jumped 48% during the latest quarter, with its global commercial customer count up a matching 48%. In other words, Palantir should have no trouble sustaining a double-digit growth rate for the foreseeable future.

But there are issues to consider with this groundbreaking AI stock.

For starters, every game-changing innovation since the advent of the internet in the mid-1990s has navigated its way through an early stage bubble that eventually burst. If an AI bubble were to form and burst, Palantir's multiyear government contracts and subscription model for Foundry WOULD initially protect it from a sales dropoff. Nevertheless, shares would have a clear target on their back since the company is one of the faces of the AI revolution.

The bigger concern with Palantir stock is its valuation.

Companies that were on the leading edge of previous bubbles, including the dot-com bubble, saw their shares peak at price-to-sales (P/S) multiples ranging from 30 to 40, with a tiny bit of wiggle room at the top. Palantir shares closed out August at a P/S ratio of 115! No megacap company has ever been able to sustain a P/S multiple of 30 to 40 for any extended period of time, let alone a triple-digit P/S ratio.

While Palantir is a solid company, there's simply no justifying its valuation. With risk factors far outweighing the reward, investors would be wise to steer clear of this highflier in September.