Got $1,000? These 3 AI Stocks Are Still Cheap

Over the past 18 months, investors have poured money into AI stocks. A greatly upgraded version of OpenAI's ChatGPT released in November 2022 made the general public reassess AI's strength, and several stocks rose dramatically.  

The market did not treat all AI stocks similarly, and some faltered due to the idea that they were falling behind. Market opinions were likely too pessimistic, presenting an opportunity in three AI stocks for investors with a $1,000 budget. Let's examine why these three AI stocks are cheap.  

1. Alphabet Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has long been associated with AI. It has led AI since 2001, when it started employing machine learning to check spelling. Since 2016, it has integrated AI into all products as a "AI-first" company. However, ChatGPT's upgrade changed perceptions. Investors wondered if Alphabet could keep its search advantage once Microsoft's Bing integrated ChatGPT in 2023. Its rival, Google Gemini, also garnered mixed reviews.  

The corporation merged its AI research divisions with Google DeepMind to streamline its efforts. Additionally, it has $111 billion in liquidity. Thus, if it cannot innovate, it can likely acquire a company that can. These resources should help the organization compete in AI.  

Despite its "struggles," its stock is up about 50% in the last year to just under $160 per share. Its 27 P/E ratio makes it less valuable than the "Fab 4" stocks (see chart). Due to its value and flexibility, negative impressions may be a purchasing opportunity for the company.  

2. Apple Investors may not realize Apple (NASDAQ: AAPL) is an AI firm. It heavily funds AI research, and Siri, FaceID, and the iPhone's keyboard are AI-driven. In recent years, Apple has not developed a "major" new product, and Apple Services is its fastest-growing revenue category. This technique may have made Apple appear less competitive in technology.  

Benzinga reports that Apple will unveil generative AI tools in June. The first quarter of fiscal 2024 (ending Dec. 30) ended with $173 billion in liquidity, even after unrealized profits and losses. With such resources, it may compete in AI. Apple shares fell in 2024 amid pessimism and missed the AI-driven bounce in 2023. However, its P/E ratio dropped to 28, making it cheaper than other Fab 4 stocks. As generative AI becomes clearer and more actionable, investors might earn big returns if they buy at today's price, $175 per share.

3. Alibaba Cheap AI stocks from Alibaba (NYSE: BABA) are hard to undercut. Alibaba now trades at 13 times earnings. Being China's largest e-commerce company and using cloud infrastructure, it mimics Amazon.  

However, various factors have made it cheap. Alibaba stock is an American depositary receipt (ADR), therefore stockholders own a proxy. That structure is common for multinational stocks, but it's problematic when government ties worsen.  

Unfortunately for American investors, weak U.S.-China ties prevented the SEC from accessing the company's internal audits in 2022, threatening delisting. The U.S. and China settled this issue, but it reminded people of this stock's vulnerabilities. Alibaba is dangerous, but its stock price may indicate that investors have overpriced the risk. If conditions improve, the stock might skyrocket, enticing investors despite its hazards.  

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