Want to add some promising artificial intelligence (AI) stocks to your portfolio, without paying an obscene price? While many stocks are trading at inflated valuations, there are still many good options out there to consider, which can deliver strong returns for your portfolio.
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Three AI stocks that possess a lot of upside and are among the cheapest options for growth investors to buy right now are Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL), Alibaba Group Holdings (NYSE: BABA), and Advanced Micro Devices (NASDAQ: AMD). Here's why it may not be too late to invest in these stocks.
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Alphabet
Shares of Alphabet are down around 11% this year as investors are concerned about antitrust issues and a possible breakup of the business, or at the very least, changes to its core operations. But there's a lot to like about the business. The company is planning to spend $75 billion on capital expenditures this year as it works on creating next-generation technologies.
Alphabet's core business also still looks solid. Investors shouldn't forget that while ChatGPT has been around for multiple years now, Alphabet's ad business still remains strong -- the popular chatbot hasn't made a big dent in the company's earnings. During the first three months of this year, Alphabet's revenue totaled $90.2 billion, which came in better than expectations and rose by 12% year over year.
Earlier this year, it announced plans to acquire cybersecurity company Wiz for $32 billion. It's a great asset to add into the mix to enhance its growth prospects even further. Alphabet already has its own chatbot, Gemini, a robotaxi in Waymo, plus its amazingly popular core assets -- YouTube and Google Search. With an abundance of growth potential, Alphabet looks like a steal of a deal, trading at just 19 times its trailing earnings.
Alibaba Group Holdings
If you're looking for more of a discounted AI stock to buy, then Alibaba may be to your liking. At 15 times its trailing earnings, its valuation is low and it compensates investors for the risk that comes with buying shares of this Chinese company.
Alibaba recently released its latest AI model, Qwen3, which uses "hybrid reasoning" that can balance deep-thinking tasks alongside more standardized questions where speed is important. Tech giant Apple has partnered with Alibaba and is integrating the Chinese company's AI in its new iPhones, which is a great testament to the effectiveness and potential for Alibaba's AI in the future.
During the first three months of the year, Alibaba says its AI-related product revenue grew by triple digits for a seventh straight quarter. Although its total revenue grew by just 7% to $32.6 billion, Alibaba's vast business (which includes online retail, cloud, and logistics) is why its AI revenue isn't standing out more. But there's potential for it to be a huge growth catalyst for years to come.
Advanced Micro Devices
Investing in a top chipmaker is another good way to gain a position in AI. Advanced Micro Devices, also known as AMD, is one of Nvidia's main rivals.
The stock doesn't look terribly cheap as it's trading at a price-to-earnings multiple of 80. But when you look at its price/earnings-to-growth (PEG) multiple, which factors in how much growth analysts are expecting over the coming years, that ratio is at less than 0.6. For growth investors, anything less than one is a good multiple for PEG, and AMD is well below that level.
The company's business has been doing well recently with AMD's revenue rising by 36% for the period ending March 29, totaling $7.4 billion. Its new AI chips are proving to be in high demand, and if the company can keep on this pace, then there could be a lot of upside for AMD down the road.
CEO Lisa Su has previously forecast that its AI chip business could bring in tens of billions in potential revenue in the future. And if those projections turn out true, then this could indeed become one of the best AI stocks to buy right now.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, and Nvidia. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
