The stock market remains on an upward trajectory, and the major market indexes are at all-time highs as investors continue piling into the leading technology companies. What's the cause? Look no further than artificial intelligence (AI). Companies are pouring billions of dollars into AI infrastructure, laying the groundwork for what experts believe will be a multitrillion-dollar AI industry down the road.
It's important to avoid getting carried away. Remember, valuations always matter.
Try to keep that in mind when looking at the best AI stocks to buy today. Here are three AI leaders that happen to still trade at attractive prices, making them table-pounding buys to consider right now.
Image source: Getty Images.
1. Advanced Micro Devices
Chips have arguably been the hottest growth trend within AI over the past couple of years. Massive clusters of chips, housed in data centers, are generating the computing power to train and run increasingly intelligent AI models. Nvidia has ruled this market thus far, but Advanced Micro Devices (AMD +1.60%), or AMD, could soon push for more market share. The companies spending billions of dollars on AI need to show a sufficient return to justify such expensive investments.
AMD is showing a path to cost savings that is enticing customers. For instance, AMD claims its Instinct MI355X chip produces up to 40% more tokens (AI output) per dollar than Nvidia's equivalent. AMD CEO Lisa Su indicated during the company's Q2 earnings call that seven of the top 10 model builders and AI companies are using its Instinct chips. The upcoming MI400 will reportedly produce more than twice the compute and nearly two and a half times the bandwidth as the current generation, a massive leap in performance that could attract more dollars from these key customers.
NASDAQ: AMD
Key Data Points
AMD's stock currently trades at a price-to-sales ratio of just under 10, a third of the valuation Nvidia trades at. Nvidia has undoubtedly earned its premium to this point, but AMD could be a winning stock moving forward if the company can successfully peel off market share. Analysts have estimated Nvidia's data center dominance as high as 92% of the market, and holding onto all of that business could prove a tall task.
2. ASML
As chips become increasingly complex, so do the tools needed to build them. ASML (ASML 1.60%) designs and produces specialized equipment systems, called extreme ultraviolet (EUV) light lithography machines, that use light to print microscopic patterns on silicon wafers. It's crucial to building high-end chips, like those used in AI data centers, and ASML is the world's only company that creates these systems.
Yet, ASML's stock has tumbled and currently sits over 30% off its all-time high. Unfortunately, the Dutch company has gotten caught in geopolitical and tariff tensions that management warned could weigh on ASML's business in 2026. It's not ideal, but the adversity may have created a buying opportunity. AI chip companies have multiyear roadmaps in place, and the foundries that manufacture these chips will continue to need ASML's cutting-edge machinery over the coming years.
NASDAQ: ASML
Key Data Points
Wall Street analysts have lowered their long-term expectations for ASML due to the current headwinds, yet still peg long-term annualized earnings growth at over 16%. The stock's price-to-earnings ratio (28) is still very fair for that growth, and would look like a bargain in hindsight if these storm clouds part and ASML outperforms expectations over the coming years. The company's monopoly on these crucial EUV lithography machines may warrant investors taking a leap of faith in an otherwise excellent company.
3. Alphabet
Search engine giant and Google parent company Alphabet (GOOG 0.28%)(GOOGL 0.28%) has faced some doubts after the U.S. government came after its core search engine business, and the explosive popularity of ChatGPT and other AI chatbots has raised questions about whether people will still use Google Search years from now. So far, it seems that Alphabet is rising to the occasion.
Time will tell whether the company faces any severe outcomes from its antitrust litigation, but what's clear thus far is that Google Search is still doing just fine. The business unit's revenue rose 12% year over year in the second quarter. Meanwhile, the company's other segments are thriving on AI momentum, including Google Cloud revenue surging 32%, and its autonomous ride-hailing business, Waymo, continuing to expand across the United States.
NASDAQ: GOOGL
Key Data Points
Alphabet remains a multifaceted play on AI and other technology trends. The stock has recently bounced back to near new highs, but I would argue that it remains a compelling buy today. Shares trade at a P/E ratio of less than 22, a fantastic valuation for a business that analysts anticipate growing earnings at an annualized rate of almost 15% moving forward.
