The artificial intelligence (AI) trend played a central role in the stock market's rise over the past couple of years. Numerous companies benefited from the proliferation of this rapidly advancing technology, and investors bought their shares hand over fist based on impressive growth rates and sunny long-term prospects.
However, 2025 is so far turning out to be a far-less-happy experience for those with tech-heavy portfolios.
Investors have been selling off AI stocks and booking profits as they look to preserve their capital amid the ongoing volatility and economic uncertainty caused by President Donald Trump's actions to adjust the economy to his liking. The tech-laden Nasdaq Composite index has already entered bear market territory (down more than 22% as of Tuesday morning), and it remains to be seen how long the negativity is going to last amid the ongoing trade war triggered by Trump's tariff policies.
JPMorgan analysts predict that the U.S. economy will enter a recession in 2025 thanks to the tariffs. So it won't be surprising to see investors staying on the defensive and protecting their capital. Yet at the same time, savvy investors sitting on surplus cash may want to consider picking up shares of top AI stocks that are trading at attractive valuations amid the ongoing sell-off.
That's because AI adoption is currently in its early phases and the technology is expected to see widespread growth thanks to the productivity gains it could deliver. Two AI stocks that got hammered down to attractive valuations recently are C3.ai (AI +3.58%) and The Trade Desk (TTD 1.46%). Both could turn out to be big winners in the long run.
1. C3.ai
Enterprise AI software provider C3.ai's stock trades down by 44% year to date. As a result, it trades at a price-to-sales ratio of 6.5, well below its 12.3 P/S ratio at the end of 2024. The company's sales are growing at a healthy rate, and its generative AI solutions are gaining traction among a diverse customer base.
NYSE: AI
Key Data Points
As a result, C3.ai's growth rate is accelerating. Revenue in the first nine months of its fiscal 2025 increased by 25% year over year, compared to the 15% growth it reported in the first nine months of its fiscal 2024. That can be attributed in part to the company's strategy of partnering with major cloud service providers such as Microsoft, Alphabet's Google, and Amazon, and offering its generative AI solutions on their platforms.
The good part is that the company has been extending its relationships with these tech giants to improve visibility and increase its reach. Explaining its partner strategy, C3.ai arranged for its generative AI service to analyze its Q2 and Q3 financial reports and then summarize them through statements read out by the AI on the company's February earnings conference call. C3.ai's agentic AI said:
The most significant development in Q2 was the expansion of our strategic alliance with Microsoft Azure, which we believe will be an inflection point in the enterprise AI industry. This partnership not only expanded our sales reach but also shortened our sales cycles, positioning us for accelerating growth.
C3.ai said it shortened its sales cycle by 20% following its expanded Microsoft partnership. Even better, it witnessed a 460% quarter-over-quarter increase in the number of agreements it signed with customers. Not surprisingly, it's following a similar playbook with other cloud partners as well. It recently expanded its relationship with Amazon Web Services to offer "advanced enterprise AI solutions together, further enhancing our global reach and execution speed."
All this helps explain how C3.ai closed 66 agreements last quarter, up by 72% from the prior year. Another thing worth noting is that its existing customers -- both government and commercial -- adopted more of its solutions. This is probably one of the reasons why analysts have raised their revenue growth expectations for the company.
Data by YCharts.
With the demand for generative AI software solutions expected to grow at an annualized rate of 30% through 2033, there is a good chance that C3.ai will continue growing at healthy rates beyond the next three years, which is why buying this AI stock following its recent slide looks like the right thing to do from a long-term perspective.
2. The Trade Desk
Share prices of The Trade Desk have crashed by 60% so far this year, and one reason why is because of the poor quarterly results and guidance it released in February. However, with the bad news already priced in and The Trade Desk trading at 59 times earnings right now -- as compared to 189 times earnings at the end of 2024 -- it seems to be worth buying.
NASDAQ: TTD
Key Data Points
After all, The Trade Desk has been growing at a faster pace than the digital ad market in which it operates. It has been using AI in its programmatic advertising platform for the past seven years, automating the purchase and sale of digital ad inventory in real-time with the help of big data.
This is one of the reasons why advertisers have found The Trade Desk's platform attractive, driving healthy growth in its revenue over the years.
Data by YCharts.
Now, it is doubling down on integrating AI into its programmatic advertising platform. The company pointed out on its February earnings conference call that it is transitioning all of its clients from a legacy platform to its AI-powered Kokai platform, which is more effective and improves "the ability of advertisers to find value and precision as they expand their audiences and grow their businesses."
That's a smart thing to do considering that the adoption of AI in the digital ad market is expected to grow at an annualized rate of almost 27% through 2030. So the Trade Desk's efforts to make AI pervasive across its programmatic ad platform should ideally help the company sustain its healthy growth rates in the long run.
The Trade Desk will be working on bolstering its sales force, making structural changes to the business, and making its product development teams more agile to keep up with the changing trends in the programmatic ad space. These efforts will weigh on its bottom-line growth in 2025 -- analysts expect the company's earnings to grow by just 8% to $1.79 per share. But the forecast for the next two years points toward better times.
Data by YCharts.
So, The Trade Desk's relatively attractive valuation and the massive opportunity in the programmatic ad market -- which is expected to generate a whopping $2.75 trillion revenue in 2030 -- are the reasons why buying this stock makes sense right now as the addition of AI-focused tools should allow it to corner a nice chunk of this space.
