While tech stocks continue to lead the market higher, that doesn't mean there still aren't bargains to be found in the sector. Both International Business Machines (IBM 0.27%) and Pinterest (PINS +1.82%) look underappreciated right now, and appear to be set up for bull runs in 2026 and beyond.
IBM
Some may still think of IBM as an old-school tech company, but it has for years been undergoing a big transformation. It spun off its lower-margin information technology infrastructure service business back in 2021, and has been focusing on higher growth opportunities. Nonetheless, the stock is still relatively cheap, trading at a forward price-to-earnings (P/E) ratio of under 23 based on analysts' estimates for 2026, and a forward price/earnings-to-growth (PEG) ratio of around 0.26. Stocks with positive PEG ratios below 1 are generally considered to be undervalued.
The company is seeing strong traction for its artificial intelligence (AI) offerings, including watsonx and Red Hat AI. It has also formed a partnership with Anthropic to embed its Claude large language model (LLM) into IBM's software portfolio to improve its AI capabilities. At the same time, IBM's z17 mainframe platform has been helping drive hardware growth, given its advanced AI inference capabilities. In Q3, this helped lead to a 10% growth in its software business and 17% growth in its infrastructure segment.
NYSE: IBM
Key Data Points
However, it is the company's progress in quantum computing that should excite investors the most. IBM is not just dabbling in this emerging technology, but funneling a significant amount of resources into its effort to become a "quantum first" company. It's taking a two-pronged approach with quantum chips. Its Quantum Nighthawk chip has been redesigned to increase connections so it can outperform classical computers, while its experimental Quantum Loon chip is leading the way toward what the company describes as "practical, high-efficiency quantum error correction."
Its Qiskit software platform, meanwhile, is a top open-source platform for quantum computing, and it has been optimized for IBM's hardware.
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Trading at a forward P/E ratio of below 12 based on analysts' 2026 estimates, Pinterest (PINS +1.82%) is one of the cheapest growth stocks on the market today. The social media company has been growing nicely, with its revenue climbing by 17% last quarter and its adjusted EBITDA soaring by 24%.
Its growth has been led by international markets, where it is both growing its customer base and its ARPU (average revenue per user). The company has teamed up with Alphabet to better monetize users in emerging markets, and that strategy is showing signs of working.
Meanwhile, Pinterest has been seeing strong growth in Europe. Last quarter, the number of monthly active users in Europe grew by 8% to 150 million, and its ARPU rose by 31% to $1.31. Meanwhile, in its "rest of world" region (which comprises everywhere outside of North America and Europe), monthly active users rose by 16% to 347 million, and ARPU climbed 44% to $0.21.
The company now has far more international users than it does users in the U.S. and Canada (103 million), so its opportunity to profit by better monetizing them is huge.
NYSE: PINS
Key Data Points
Meanwhile, the company has been transforming itself from simply an online vision board into an AI-powered discovery shopping platform. It developed a multimodal AI model that can identify multiple objects in a photo and provide shopping links to each one, as well as help power its visual search function. It's also using AI to create shoppable collages based on users' tastes, has a feature that lets users virtually try on clothes, and even has an AI assistant that can help users shop.
At the same time, Pinterest has been using AI to improve its platform for advertisers with its Performance+ suite. Advertisers can now use AI features to create better campaigns and even link their products to an Amazon checkout. The platform can also help identify users with a high intent to make a purchase, to help them bid accordingly and improve conversions.
This is not your old Pinterest. The company has transformed its platform, and Gen Z is now its largest and fastest-growing demographic. If the company continues its strong growth, the stock should rally nicely in 2026.
