The market was enchanted with artificial intelligence (AI) in 2023 and 2024. At one point, it felt like AI stocks couldn't go down. That vibe has changed in 2025. AI stocks have started to tumble quickly, with AI-related companies like Palantir Technologies and Tesla trading down over 30% from all-time highs.
Investors are worried about slowing spend for these companies along with the general broad market weakness that has come with rising concerns about a possible recession as well as the Trump administration's various proposed and enacted tariffs.
This price drop among AI-related stocks has presented some attractive buy-the-dip opportunities for investors focused on the long term. Here are two AI stocks to buy the dip on right now.
NASDAQ: GOOG
Key Data Points
Alphabet: Pushing the boundaries of innovation
Alphabet (GOOG +1.09%) (GOOGL +1.31%) has a manic-depressive reputation with Wall Street. Some days, it seems like the owner of Google, YouTube, and Google Cloud is lifted up as the most innovative AI company in the world. On other days, the narrative shifts to pessimism around upstart competition from the likes of OpenAI and others.
To start 2025, the pessimism is taking the lead and it has provided a buying opportunity for this high-quality business. Alphabet's revenue grew 15% year over year in 2024 to $350 billion. Operating income grew 33% to $112.4 billion. If Alphabet is feeling the pain from AI competition, it isn't showing up in its financials. The company is innovating rapidly across its sprawling technology operation. It is bringing AI to the masses by embedding new tools in Google Search, selling cloud computing to third parties through Google Cloud, and expanding its robotaxi service, called Waymo, in major U.S. cities.
That is just the tip of the iceberg. At its Google Deepmind division, researchers are working on cutting-edge AI advancements, such as embedding language models in humanoid robots. There is even work on quantum computing. If Alphabet is losing in AI, I see no evidence of that.
With the stock down 20% from all-time highs, Alphabet now trades at a price-to-earnings ratio (P/E) of 20, which is well below the S&P 500 average of 28. Even if there are new competitive threats and macroeconomic risks with tariffs in the short term, now looks like a great time to load up on Alphabet shares and hold for the long haul.
Data by YCharts.
Applied Materials: The AI base layer
Unlike Alphabet, which almost every person in the world has interacted with, Applied Materials (AMAT 0.94%) is not a consumer-facing business. It develops and sells machines to help in the semiconductor manufacturing process, which is vital for AI innovation. Without advanced computer chips, it would be uneconomical to operate these advanced AI tools that companies like Alphabet have developed.
NASDAQ: AMAT
Key Data Points
Along with a wider group of semiconductor equipment companies, Applied Materials helps manufacturers shape, process, and analyze tiny transistors on semiconductors. Without these machines, you wouldn't get tiny 3-nanometer lengths between transistors, making the company a vital part of the AI supply chain.
Applied Materials has grown along with the semiconductor market in the last few decades and is now a global giant. Analysts expect the industry to continue growing faster than global GDP, which will be helped by the boom in AI spending. This should lead to even more growth for Applied Materials. In the last 10 years, Applied Materials has grown its sales by close to 200%.
With a consistent share buyback program, management has reduced shares outstanding by 34% in the last 10 years and plans to deploy at least 80% of its free cash flow to dividends and buybacks in the future. An additional $10 billion buyback authorization and 15% dividend increase was recently approved by the company's board of directors.
With the P/E now below 20, Applied Materials looks like a cheap growth stock with an attractive capital returns program, making it a perfect stock to buy and hold for many years.
