Few forces have played a bigger role in the current bull market than the rise of artificial intelligence (AI). Generative AI holds the promise of improved productivity and creative breakthroughs with far-reaching impacts across industries. So far, a handful of companies have emerged as primary beneficiaries, while investor excitement around AI's potential has pushed the valuations of other companies considerably higher.
With many AI stocks rallying into the end of the year, many investors may be wondering if they've missed the boat. Fortunately, there are still numerous AI-related companies trading at attractive valuations. Three stocks have recently seen pullbacks in their stock prices, making them no-brainer buys right now.
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1. Meta Platforms
Meta Platforms (META +2.26%) has seen its ad business benefit greatly from its improvements in AI, and there's still a long way for it to go in getting the most out of generative AI for its business. The company saw ad revenue climb 26% last quarter, driven by increases in both price per ad and impressions.
Historically, Meta has seen increases in ad impressions as it looks to monetize new products, as it's currently doing with Threads and WhatsApp. However, the increased inventory typically results in lower average ad prices. In the current expansion, though, Meta is benefiting from improved ad targeting and AI-powered creation tools, making its ads more effective, thus increasing marketers' willingness to pay.
NASDAQ: META
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But the impact of AI on Meta's business could be even bigger going forward. The company plans to release an AI agent that can handle the entire ad creation and testing process. Marketers will provide an objective and a budget, and Meta's AI will handle the rest. That has the potential to unlock tons of small business budgets that couldn't effectively compete for ads on Facebook and Instagram before.
AI chatbots across Meta's messaging services could provide another opportunity for small businesses to compete with larger companies with a digital workforce. And Meta's own AI chatbot could provide another product that it can monetize with ads.
To be sure, Meta is spending heavily to build its AI capabilities. That includes over $70 billion in capital expenditures this year and a significant step up in spending next year. Additionally, the company has received some heat for its off-balance-sheet financing for new data centers through special purpose vehicles, which makes Meta's debt load seem less than it is.
Nonetheless, the top-line results and potential for continued growth seem to justify the spending. After a pullback in the stock price over the last couple of months, shares trade for around 21 times forward earnings estimates, making them relatively cheap compared to other AI giants.
2. Adobe
Many see the growing capabilities of artificial intelligence as a significant threat to Adobe's (ADBE +0.82%) core business of subscription digital media software. However, Adobe's Creative Cloud has become entrenched in the workflows of creative professionals.
Adobe knows it can't stand still, though, and it is making improvements to its core software suite with add-on acquisitions and the introduction of its FireFly AI model. That enabled it to retain users and raise revenue per user, resulting in steady double-digit growth in annual recurring revenue (ARR) for its digital media segment. The metric came in at 11.7% last quarter, and management expects 11.3% growth for the full year.
NASDAQ: ADBE
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Management continues to expand its AI tools as well, and it's seen sales of its AI-first products climb to $250 million in ARR as of September, ahead of its outlook from earlier this summer.
Meanwhile, management says AI-influenced annual recurring revenue has climbed $1.5 billion in 2025 so far, reaching $5 billion last quarter. That's, in part, driven by strong top-of-funnel attachments for its free web-based software. Management said Acrobat and Express product monthly active users climbed 25% year over year last quarter.
Indeed, AI has been a greater benefit to Adobe than a strain on its finances. There has been limited pressure on user retention, and management has used new AI developments to attract new users and increase revenue for existing ones. Nonetheless, investors have been unimpressed for the most part. Shares now trade for a forward PE below 14, which is an incredibly low price for a company that continues to grow its top and bottom lines at a double-digit rate.
3. Microsoft
Microsoft (MSFT +1.34%) catapulted to the forefront of the AI conversation when it increased its investment in OpenAI by $10 billion in early 2023 on top of earlier investments. Its stake is now worth about $135 billion, so it's proven a great investment for Microsoft. But the company's gotten much more out of the investment as well.
It's seen strong results for its Azure cloud computing business, which previously held exclusive rights to OpenAI's compute contracts. As a result, it developed some of the best AI services in the market, leading to strong growth from other customers. Last quarter, Microsoft saw its cloud backlog (which also includes its Microsoft 365 software-as-a-service) climb 51% year over year to $392 billion.
NASDAQ: MSFT
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Azure growth remains strong, climbing 39% in the most recent quarter. That's despite capacity constraints management continues to work through. To that end, it's spending huge amounts on building new data centers. Last quarter's capex came in at $34.9 billion, and management said that total will climb this quarter and expense growth will accelerate for the full year.
But Microsoft is well positioned to support that kind of spending, as it generates huge amounts of free cash flow from its software business. Despite the huge spending on data centers last quarter, free cash flow totaled $25.7 billion.
Microsoft stock isn't as cheap as the other recommendations, with shares trading around 30 times forward earnings. However, the company is a leader in AI in the cloud and in workplace productivity software, two of the biggest opportunities in the market. The current price is well below its average valuation over the last few years and appears to be a good entry point for the tech giant's stock.
