Artificial intelligence (AI) is completely reshaping how businesses operate. It promises to speed up productivity, product development, innovation, and economic growth, which is why organizations are pouring billions into AI technology.
Some AI stocks are trading close to new highs and fully reflect this potential. But others are trading at big discounts to their previous highs, even while these businesses are reporting robust demand for their services. Here's why shares of AI chip maker Advanced Micro Devices(NASDAQ: AMD) and software provider C3.ai(NYSE: AI) could be due for a massive rebound.
Image source: Getty Images.
1. Advanced Micro Devices
After falling 56% from their previous peak, shares of Advanced Micro Devices are trading at a very attractive valuation. AMD just reported another quarter of strong growth, as it prepares to launch new data center chips to capitalize on the growing demand for AI chips. Cloud service leader Amazon just recently revealed a small stake in the company's stock, which is a big vote of confidence in AMD's technology.
Revenue accelerated in the first quarter, surging 36% year over year. CEO Lisa Su said, "Despite the dynamic macro and regulatory environment, our first-quarter results and second-quarter outlook highlight the strength of our differentiated product portfolio and consistent execution positioning us well for strong growth in 2025."
AMD's data center segment posted a 57% year-over-year increase in revenue. It's also winning big on the consumer side, where it continues to gain share against Intel. AMD's client segment posted a 68% year-over-year revenue increase, driven by strong demand for its latest Zen 5 Ryzen processors.
Looking at its outlook for the second quarter, AMD sees revenue increasing to approximately $7.4 billion, representing a year-over-year increase of 27%.
Meanwhile, Amazon just revealed a new stake in AMD stock worth $84 million at the end of Q1. This comes ahead of AMD's upcoming launch of its new Instinct MI350 graphics processing units (GPUs) for data centers in the second half of the year. Amazon's investment could signal confidence in AMD's offering, especially as a lower-cost alternative to AI chip leader Nvidia.
Importantly, AMD is delivering solid growth on the bottom line, with adjusted earnings up 55% year over year. The stock's forward price-to-earnings multiple of 22 seems to significantly undervalue AMD's ability to serve a massive AI chip opportunity. This low valuation could set the stage for outstanding returns over the long term.
Image source: Getty Images.
2. C3.ai
The momentum around Palantir Technologies' business has overshadowed the strong growth that C3.ai has reported for its AI software offering. C3.ai has an impressive customer list. Its software is used for classified work in the U.S. military, in addition to supplying mission-critical software for large corporations. The stock is down 35% in 2025, which could lead to a significant rebound as the company continues to secure new deals with large organizations.
C3.ai reported a 26% year-over-year increase in revenue in the January-ending fiscal third quarter. "We have the technology, the management team, and the global partner ecosystem -- through our dramatically expanded strategic partnerships with Microsoft, [Amazon Web Services], and McKinsey QuantumBlack -- we believe we have all the elements in place to indelibly change the face of Enterprise AI," CEO Thomas Siebel said.
The consensus Wall Street estimate has the company's revenue increasing by 25% next quarter, according to data from Yahoo! Finance. C3.ai's partnership to offer its solutions through leading cloud services like Microsoft Azure and Amazon Web Services bolsters its long-term growth prospects.
Since it closed the deal with Microsoft, C3.ai has seen a 460% year-over-year increase in new agreements. The company said that 71% of its agreements last quarter were through collaborations with these partners, indicating the potential for this sales collaboration to drive accelerating growth over the next few years.
C3.ai is winning over industry leaders with its focus on solving complicated problems for large businesses that have sprawling supply chains and global operations. It has a growing list of customers across state and local governments, the U.S. military, and Fortune 500 companies.
While Palantir stock commands a high price-to-sales multiple of 87 at the time of this writing, investors are overlooking C3.ai's potential, with the stock trading at a more modest 8 times trailing revenue. That's a huge valuation gap that sets up attractive upside potential for investors.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Ballard has positions in Advanced Micro Devices and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Intel, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.
