Artificial intelligence (AI) is disrupting many industries thanks to the efficiency gains that the technology can bring, such as by automating tasks or predicting potential challenges that a business may face. Because of that, spending on AI solutions and infrastructure has been growing at an incredible pace.
Companies benefiting directly from this saw nice surges in their stock prices, a fact reflected in the 67% jump that the tech-heavy Nasdaq Composite index managed in the past three years. However, not every company that saw its growth rate expand thanks to the proliferation of AI experienced share price gains to match.
Let's take a look at two such names that aren't among Wall Street's favorite AI stocks right now, but that could become winning investments in the long run because of their robust growth potential.
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1. ASML Holding
While demand for AI chips surged in the past couple of years, share prices of semiconductor bellwether ASML (ASML 0.11%) failed to reflect this booming market. Though the company sells vital advanced chipmaking equipment to the world's leading foundries and chipmakers, ASML's stock rose just 5% in the past couple of years.
One reason is that the company had an underwhelming 2024. Its revenue barely increased while earnings fell on account of weakness in chip demand for markets such as personal computers (PCs) and smartphones. Though ASML got an AI-powered boost because its extreme ultraviolet (EUV) lithography machines are necessary for manufacturing the most advanced AI chips that go into servers, smartphones, and PCs, and other devices, the company's growth hasn't been robust enough.
However, ASML's growth improved substantially in 2025's first quarter. Its revenue increased by 46% year over year in Q1, while its earnings almost doubled. Moreover, it received new equipment orders worth nearly 4 billion euros in Q1, up by nearly 10% from the prior-year period.
The Dutch company now forecasts 32.5 billion euros in revenue this year at the midpoint of its guidance range, which would be a 15% improvement over 2024. However, there is a strong possibility that it could end up growing faster owing to AI. On its earnings conference call in April, CEO Christophe Fouquet remarked:
If AI demand continues to be strong, and customers are successful in bringing on additional capacity to support that demand, there is potential opportunity toward the upper end of our range.
He added that both 2025 and 2026 are set to be growth years for the company thanks to AI. That isn't surprising: ASML's EUV lithography machines are the only ones capable of making chips using the most advanced 5-nanometer (nm) and 3nm process nodes. Demand for these chips has been robust as top chipmakers such as Nvidia, AMD, Marvell, Broadcom, and consumer electronics companies such as Apple have been deploying them in data centers, PCs, and smartphones.
With the demand for AI chips forecast to increase at an annualized rate of 35% through 2033, it won't be surprising to see foundries and chipmakers investing more money in their manufacturing infrastructure. Industry association SEMI reports that a total of 18 new fabrication plants are on schedule to go into construction this year.
The construction of these plants was necessitated by the advent of generative AI and high-performance computing, which have boosted the demand for advanced chips. So, it is easy to see why analysts' consensus estimates are for an acceleration in ASML's earnings growth.
Data by YCharts.
With the stock trading at an attractive 27 times forward earnings as compared to the U.S. technology sector's average earnings multiple of 47, investors can get a good deal on an AI stock with the potential to go on a bull run.
2. Ambarella
Ambarella (AMBA -0.35%) is another chipmaker that got a big shot in the arm thanks to AI. Its computer vision chips are used in the automotive segment and in Internet of Things (IoT) devices such as security cameras and drones.
As a result, this lesser-known chipmaker is in a nice position to capitalize on the secular growth opportunity presented by the fast-growing market for AI edge computing -- devices that are physically located relatively close to end-users. This allows data processing tasks to be handled locally, which means results get back to users faster than they would if the tasks were sent to more distant cloud computing centers. Fortune Business Insights expects the edge AI market to clock a compound annual growth rate of 33% through 2032.
Ambarella is already benefiting from this market. It generated $285 million in revenue in its fiscal 2025 (which ended Jan. 31), more than 70% of which was from edge AI applications. Its revenue increased by 26% in the fiscal year. Management anticipates an increase of 19% to 25% in its revenue in the current year, but don't be surprised to see it do better than that.
Ambarella released its fiscal 2026 first-quarter results on May 29. It reported a terrific 58% year-over-year increase on its top line to $86 million, which was at the higher end of its guidance range. It also reported an adjusted profit of $0.07 per share as compared to a loss of $0.26 per share in the prior-year period.
The chipmaker's guidance for the current quarter is for a jump of 41% year over year. So, there is a good chance that Ambarella will be able to end this fiscal year with stronger revenue growth than it is currently guiding for. Even better, the company's bottom line is also on track to grow at an incredible rate thanks to the higher average selling price of its edge AI processors.
Not surprisingly, analysts expect Ambarella to report a profit this year as compared to a loss in the previous one, followed by strong bottom-line growth in the next couple of fiscal years.
Data by YCharts.
What's more, Ambarella management expects its serviceable addressable market to hit $13 billion in the next five years, which means that it has the potential to keep growing at healthy rates for a long time to come. That's why investors should consider buying this underrated chip stock while it is beaten down, as its 12-month median price target of $80 points toward a potential upside of almost 50% from current levels.
