[US Stock Trends] 3 Undervalued AI-Related Stocks | Motley Fool US Stock Information | Moneyクリ MoneyX Securities Investment Information and Media Useful for Money

Motley Fool U.S. Headquarters – From the article posted on June 14, 2025

More than 40% of S&P 500 companies have mentioned AI for five consecutive quarters.

AI has been one of the most talked-about themes on Wall Street over the past two and a half years. According to FactSet Insights, which provides economic information, more than 40% of companies in the S&P 500 index have mentioned AI in their earnings announcements for the last five consecutive quarters. In fact, nearly all companies are likely paying attention to how recent innovations and spending on AI affect every aspect of their business.

However, while AI can bring significant growth to some companies, it may become a cost center for others if clear results are not achieved. Moreover, even for growth companies that fall into the former category, investors need to carefully consider large investments, taking into account the possibility that growth may slow down as AI businesses expand.

Finding undervalued stocks related to AI might be difficult. The following three companies are currently trading at a stock price of less than $200 per share and are considered to offer attractive investment value when considering future growth potential. All three companies are expected to benefit from the growth of AI and play a significant role in the future development of AI and computing.

1.Alphabet [GOOGL]

Many investors are concerned about the impact of AI on Alphabet's flagship product, Google Search. Eddy Cue, Apple's senior vice president in charge of services, testified that the number of searches on Apple's browser, Safari, decreased in April 2025 for the first time in 22 years. This supports the idea that AI services like ChatGPT, provided by AI development company OpenAI, are eroding market share.

The decrease in the number of search queries in a single browser is surprising, but it is not a major concern. AI serves as a growth driver for Alphabet rather than a challenge. The company has achieved great success with its "AI Overview" feature, which displays a concise summary at the top of the search results page, enhancing user engagement while monetizing at the same level as traditional search results. Additionally, it offers new features such as Circle to Search, which utilizes AI, and Google Lens, a new type of search function that employs image recognition technology, which are delivering results beyond expectations for high-value product searches.

AI is significantly boosting the growth of Alphabet's Google Cloud business. In the first quarter of 2025, revenue increased by 28%, and operating profit margin rose from 9.4% to 17.8%. Management stated that the supply shortage continues, and sales are expected to continue to grow strongly in the future. Furthermore, competing cloud computing companies that are larger than Google Cloud boast even higher operating profit margins, indicating that there is room for profit expansion as they scale.

As of the time of writing this article, the stock price is approximately $177, and the price-to-earnings ratio (PER) based on the expected earnings per share (EPS) is about 18.5 times. This is significantly lower than comparable stocks; however, Alphabet is facing regulatory pressures, and there are concerns that AI could negatively impact cash flow. Nevertheless, considering the business that generates substantial cash flow, the increasingly profitable cloud computing business, and the large shareholder return program, the current stock price level appears very attractive.

2. Qualcomm [QCOM]

Qualcomm is not a semiconductor manufacturer that many people talk about. Instead of producing high-performance image processing devices (GPUs) or custom semiconductors for AI training and inference, the company primarily manufactures semiconductors that are used in smartphones.

Qualcomm is planning to enter the data center business and is focusing on central processing units (CPUs) designed to work in conjunction with AI accelerator semiconductors that are engineered to speed up computational processing. The company believes it can leverage its expertise in manufacturing low-power, high-performance semiconductors for smartphones to effectively design semiconductors for data centers. Additionally, it recently agreed to acquire the UK semiconductor company Alphawave Semi with the aim of enhancing data center capabilities.

Qualcomm is expected to face intense competition in the data center market, but AI inference is not solely performed in the cloud. There is a growing trend to execute AI processing on the devices themselves, providing advantages in terms of security, privacy protection, and processing speed.

As a result, Qualcomm is well-positioned to expand its market share, and its "Snapdragon" mobile processors are equipped in most high-performance Android devices. As AI processing capabilities within devices become a differentiating factor, the demand for high-performance devices is expected to increase, potentially boosting sales of the company's mobile processors.

For the time being, Qualcomm holds patents for wireless baseband semiconductors that are used in almost all smartphones, and it receives royalties for every smartphone sold. Apple is moving away from Qualcomm and is developing its own semiconductors, but there are significant hurdles in that process.

Most other smartphone manufacturers lack the capability, capital, or scale to sever their relationship with Qualcomm. Therefore, the licensing business is likely to remain a stable source of revenue for Qualcomm in the future.

At the time of writing this article, the stock price is approximately $160, and the PER based on the expected EPS is only about 13.5 times. This can be considered undervalued for a company with a strong long-term position in the Android mobile device market, but it seems that Apple's movements are having an excessive impact on the stock price. The data center business is on the horizon and has the potential to become a large-scale operation like mobile processors. Nevertheless, the mobile semiconductor and licensing business alone is generating stable free cash flow, making it seem like there is excellent investment value at the current stock price.

3. Applied Materials [AMAT]

Cloud computing providers are looking to expand data centers by utilizing semiconductors for AI training and inference, but someone needs to manufacture those semiconductors, and specialized equipment is required to achieve that.

This is where Applied Materials comes in. The company manufactures a wide range of silicon wafer processing equipment, including etching, deposition, and process control.

Applied Materials' ability to engage in all these fields is one of its strengths. The company combines and sells its manufacturing equipment to semiconductor manufacturers, enabling it to compete with more specialized equipment manufacturers. Additionally, as one of the largest equipment manufacturers, it is in a favorable position to reinvest its income into research and development aimed at the development of next-generation equipment and the expansion of its product portfolio, creating a virtuous cycle and broadening its technological lead.

The move to expand semiconductor production is a strong tailwind for Applied Materials. Despite sales restrictions in China and slow growth in the automotive sector, the company's revenue for the first quarter of 2025 increased by 7%. The transition to higher-performance devices also contributed to expanding the gross profit margin to over 49% in the first quarter.

Applied Materials' products have a very high "stickiness." This means that once semiconductor manufacturers purchase the company's equipment, they tend to use it for a long time. Manufacturers want to make the most out of the company's products, resulting in a longer product lifespan and leading to persistent service revenue.

As of the time of writing, the stock price is approximately $175, with a PER of about 18.5 times. For companies that are steadily growing in the high single digits in revenue and expanding their profit margins, this can be considered very undervalued. Applied Materials' business has aspects that are influenced by the economy, but in the long term, it is positioned well to benefit from the ongoing trend of increasing demand for advanced semiconductors.

Disclaimer and Disclosure The article is intended for general informational purposes only and does not constitute investment advice for investors. Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool's U.S. headquarters. The original author, Adam Levy, holds shares in Alphabet, Apple, Applied Materials, and Qualcomm. The Motley Fool's U.S. headquarters holds and recommends shares in Alphabet, Apple, Applied Materials, and Qualcomm. The Motley Fool's U.S. headquarters has established a disclosure policy.