1 AI Stock I Wouldn't Touch, and 1 I Absolutely Love

The artificial intelligence (AI) boom has sent investors scrambling to find the market's biggest long-term winners. But not all AI investments offer the same risk-reward profiles. For instance, while some high-flying infrastructure companies remain deeply unprofitable, other established tech giants are queitly integrated AI into their existing products and services.

Even more, some AI stocks simply look like better long-term bets than others, both in terms of their business durability and their valuations. And those are the ones I want to gravitate to.

Here is a closer look at one AI stock I am avoiding right now, and one I absolutely love.

Image source: Getty Images.

Cloudflare: Impressive growth, but where are the profits?

There is no denying that Cloudflare (NYSE: NET) is seeing exceptional top-line momentum. The connectivity cloud company is seeing robust demand as enterprises look to secure their networks and build out AI-driven applications.

Cloudflare's fourth-quarter revenue rose 33.6% year over year to $614.5 million. This marked a notable acceleration from the company's full-year 2025 revenue growth rate of 29.8%. Management also pointed to exceptionally strong demand trends, noting that its new annual contract value bookings grew by nearly 50% year over year.

But despite its staggering top-line momentum, Cloudflare is still struggling to turn a profit. In Q4, the company reported a generally accepted accounting principles (GAAP) net loss of $12.1 million. Further, its GAAP loss from operations actually worsened, widening to $49.2 million from $34.7 million in the year-ago quarter.

The primary culprit keeping Cloudflare's bottom line in the red is stock-based compensation. While the company likes to highlight its non-GAAP (adjusted) operating income -- which came in at a positive $89.6 million for the quarter -- that figure excludes the high cost of employee equity compensation. Putting its stock-based compensation into perspective, it totaled $451.5 million in 2025, up 33% year over year and equal to more than 20% of Cloudflare's total revenue -- a massive line item, given that management prefers to present adjusted profit figures excluding this expense.

Also, the stock's valuation suggests investors are already pricing in major success. Cloudflare boasts a market capitalization of more than $76 billion as of this writing, despite remaining unprofitable and reporting annual revenue of less than $2.2 billion.

Apple: A stealth AI powerhouse

"Wait? You're calling Apple (NASDAQ: AAPL) an AI stock?" some readers might be protesting.

Absolutely.

Every device Apple makes can interact with AI in some way, and the company plans to roll out an improved Siri, backed by Alphabet's (NASDAQ: GOOG)(NASDAQ: GOOGL) Google Gemini, later this year.

Earlier this year, Apple and Google entered into a multi-year collaboration to utilize Gemini models for the next generation of Apple Intelligence features. By embedding Google's highly capable AI models directly into the Apple ecosystem, Apple is setting the stage for a major hardware upgrade cycle.

Beyond the exciting AI roadmap, Apple's underlying business remains remarkably robust. In the tech giant's first quarter of fiscal 2026 (a period that ended on Dec. 27, 2025), revenue grew 16% year over year to an incredible $143.8 billion. Even more, earnings per share jumped 19% year over year.

This combination of steady, double-digit revenue growth and even stronger profit growth is particularly impressive amid a period when many tech companies are facing rising costs as they rebuild their businesses for an AI era.

Looking ahead, I believe Apple's stock has a bullish outlook over the next five years.

The iPhone maker's massive installed base gives it a global and nearly instantaneous distribution network for its upcoming software rollouts, which will likely touch every corner of Apple's ecosystem. As consumers upgrade aging hardware to unlock these new capabilities, Apple is well-positioned to capture a multiyear wave of high-margin device sales while also tapping new software and services opportunities in an AI era. Further, as engagement deepens across its software ecosystem, the company's lucrative services segment could see accelerated momentum.

Betting on an established player

Comparing these two AI stocks shows why investors shouldn't automatically chase those with the fastest revenue growth. Sure, Cloudflare's accelerating revenue is certainly enticing, but its inability to turn a true profit makes its sky-high valuation too risky for my taste. Meanwhile, Apple gives investors a front-row seat to the consumer AI revolution while providing the safety of a highly profitable, cash-generating business.

Sure, the stock isn't cheap at a price-to-earnings ratio of 32. But I think the strength and durability of its underlying business make it worth this price. And, of course, there are other risks beyond valuation risk. For instance, it could prove more challenging than expected for Apple's product releases to remain relevant and desirable in an AI world.

Overall, however, I believe Apple will likely be a major AI beneficiary without having to invest the same extraordinary sums that software and cloud providers do to remain relevant and ultimately compete with each other.

Daniel Sparks and his clients have positions in Apple. The Motley Fool has positions in and recommends Alphabet, Apple, and Cloudflare and is short shares of Apple. The Motley Fool has a disclosure policy.