Taking on trillion-dollar companies is no easy feat. That's evident in the recent performances of both The Trade Desk (NASDAQ: TTD) and AppLovin (NASDAQ: APP). The two adtech companies have seen their share prices slashed amid competitive pressures from tech giants Amazon (NASDAQ: AMZN) and Meta Platforms (NASDAQ: META).

While growing competition from deep-pocketed tech giants with established relationships with millions of small businesses creates significant uncertainty for smaller competitors, the sell-off in both stocks may present an opportunity for investors. If you have to pick one, though, which stock should you buy: The Trade Desk or AppLovin?

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While fears of competitive pressure have impacted both The Trade Desk and AppLovin, the threat is most evident in The Trade Desk's financial results.

The Trade Desk has produced slowing revenue growth in each of the last three quarters. 2025 revenue growth slowed to 18% for the year, down from 26% in 2024.

Management's first-quarter outlook is far from encouraging, too. It expects just 10% revenue growth. That doesn't bode well for the rest of the year. Making matters worse, management's guidance suggests that adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will decline this quarter.

However, The Trade Desk CFO Tahnil Davis assured investors the adjusted EBITDA margin for the full year is expected to match last year's. The company will experience higher costs in the first quarter due to investments in infrastructure and talent.

Many investors attribute the slowdown in growth to Amazon's demand-side platform. CEO Jeff Green has repeatedly argued that Amazon primarily sells its owned-and-operated inventory, whereas The Trade Desk operates on the "open internet," as the CEO puts it. However, the financial results clearly show a competitive impact on the company.

At AppLovin, however, the threat of Meta's reentry into in-app advertising bidding has yet to show up in its financials. Revenue grew 66% year over year in the fourth quarter, and the adjusted EBITDA margin expanded from 77% to 84%. Management's first-quarter revenue guidance came in ahead of analysts' expectations, projecting 19% growth at the midpoint as it digests the strong earnings growth of 2025. Analysts expect revenue to climb 46% for the full year.

The Trade Desk's Green told analysts, "We think our business model is more conducive to, and will benefit more from, AI than any of our competitors," during the company's fourth-quarter earnings call. That starts with its new ad-buying platform, Kokai, which puts AI at the center. After a rough transition, nearly all its clients are now running through Kokai as of late February.

Green argues that The Trade Desk's advantage with artificial intelligence (AI) stems from its objectivity, which enables it to leverage first- and third-party data to optimize bids for ad buyers. Competitors like Amazon or Meta will always prioritize what's best for themselves. If it can deliver on that promise with Kokai, it could reaccelerate growth.

AppLovin's recent acceleration in revenue growth has been driven by its Axon 2 model, which optimizes ad bidding to increase return on ad spend. While The Trade Desk aims to use AI to help facilitate advertisers' decisions, AppLovin is using AI to make those decisions for them. Meta uses a similar "black box" ad optimizer.

AppLovin CEO Adam Foroughi argues that it has built a dominant AI model in the space that won't be overcome by Meta or any other competitor. "It is a closed-loop model that is continuously reinforcing itself and getting smarter," he told analysts on the company's fourth-quarter earnings call.

Meanwhile, AppLovin sees a couple more initiatives that could boost its revenue growth. First, it's rolling out self-service tools in the first half to ease the bottleneck for onboarding new customers. Second, it's testing generative AI tools that can develop ad campaigns for marketers. Both have the potential to increase the number of advertisers and the number of ads they run on AppLovin's platform, enabling it to win more placements and generate more revenue.

While AppLovin currently trades at a much higher earnings multiple than The Trade Desk, it looks like a better value right now. AppLovin's forward P/E of 29 looks like a bargain, as analysts expect earnings growth above 40% this year and around 33% next year. The Trade Desk shares are cheap, at just under 12 times earnings expectations, but the deteriorating performance makes shares tough to own.

One word of caution about AppLovin, though: It's currently under SEC investigation regarding its data-collection practices. That provides an overhang on the stock and could explain its relatively low P/E ratio, given its growth expectations. Investors may want to hold off on purchasing shares until the SEC concludes the investigation. Otherwise, it's prudent to consider a smaller position size given the risk.

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Adam Levy has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and The Trade Desk. The Motley Fool has a disclosure policy.

The Trade Desk vs. AppLovin: Which AI-Powered Adtech Stock Is the Better Buy? was originally published by The Motley Fool