If you have $5,000 to invest in the market, one way to make the most of that money is to invest in stocks that have a lot of room for long-term growth, such as those involved in artificial intelligence (AI).
Another way you can expand the potential of your investment is to focus on stocks that are also trading at cheap valuations, since they may be undervalued and possess even greater potential to generate significant returns.
Three stocks that check off both boxes are Taiwan Semiconductor Manufacturing (TSM 1.83%), Alibaba Group Holding (BABA 0.22%), and Dell Technologies (DELL -1.80%). With their modest valuations and plenty of exposure to AI, these can be excellent stocks to buy with $5,000 today.
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Taiwan Semiconductor Manufacturing
A big player in the chipmaking world is Taiwan Semiconductor Manufacturing, or TSMC. The company is responsible for making the vast majority of the advanced chips in the world, supplying 90% of them. These include AI chips. And this leadership position makes it a crucial company for AI's present and future growth.
Through the first three months of this year, sales totaled $25.5 billion, up 35% year over year. It generates high profit margins of around 40% as low-cost production in Taiwan gives it an advantage over chipmakers in North America. And the expertise it has developed over the years and economies of scale make its operations highly efficient.
TSMC is an integral player in the AI world, and it would be hard to replace its production. As AI spreads, the company is likely to experience a significant uptick in demand.
The stock currently trades at less than 23 times its future earnings (based on analyst estimates), which is an absurdly cheap valuation given that's roughly about the same multiple of the average S&P 500 stock.
But TSMC is not an average stock, and it arguably deserves much more of a premium given its huge growth potential due to AI. Given the possible upside, this can be a great place to invest $5,000.
Alibaba Group Holding
China-based Alibaba Group is another tech company in the same part of the world that can make for a compelling AI investment. It has a broad business in China that encompasses cloud computing, e-commerce, digital media, and entertainment.
Revenue for the first three months of 2025 rose by 7% to $32.6 billion. That growth rate may look unimpressive, but certain segments are growing much faster than others. Its cloud computing business, for example, rose by 18%. And its international digital commerce expanded by 22%.
The company says AI has accelerated its growth, and for a seventh straight quarter, revenue related to the technology grew by triple digits. It was reported earlier this year that Alibaba had partnered with Apple to help the iPhone maker develop AI features.
The stock is even cheaper than TSMC's shares, at a forward price-to-earnings (P/E) multiple of less than 12. Although it's up more than 30% this year, there is still plenty of room for the stock to move even higher. Alibaba has a diverse business, and with AI injecting more growth into its operations, this can be an underrated stock to invest $5,000 into right now.
Dell Technologies
Rounding out this list of underrated AI stocks is Dell Technologies. The company is known for making personal computers, but its business has been experiencing a lot of growth due to high demand for its AI-optimized servers.
In its most recent quarter, ended May 2, revenue totaled $23.4 billion, up by a modest 5% year over year. But in its servers and networking business, the increase was much higher at 16% and totaled $6.3 billion. For the current year, the company is projecting AI system sales of about $15 billion.
One area to watch is on the consumer side, however. That business experienced an 19% drop in revenue during the quarter but that may present an attractive growth opportunity since AI-powered PCs are in their early innings and may be in hot demand later on.
Unfortunately, due to a challenging economy, consumers aren't eager to upgrade to an expensive computer, even if it has cutting-edge technologies. But that could change.
Dell can benefit from AI-powered growth in multiple segments of its business, which makes it a compelling place to invest $5,000 and just sit and wait. The stock trades at a forward P/E of less than 13, making this another absurdly cheap growth stock to add to your portfolio for the long haul.
