Bats are blind (as in the saying, "Blind as a bat.") Bulls are enraged by the color red. The Great Wall of China can be seen from space.
Those are all myths that many people believe. We can add another one to the list for investors: All artificial intelligence (AI) stocks are expensive.
Many AI stocks do indeed trade at premium valuations. However, there are quite a few exceptions. If you have $5,000, here are three of the cheapest AI stocks to buy right now, based on their price-to-earnings-to-growth (PEG) ratios.
Image source: Getty Images.
1. Advanced Micro Devices
Advanced Micro Devices (AMD 3.54%) probably looks ridiculously expensive at first glance. After all, the semiconductor maker's forward price-to-earnings ratio is 39.7. AMD's shares trade at a whopping 131.6 times trailing 12-month earnings.
However, those valuation metrics don't factor in AMD's tremendous growth potential. The stock's PEG ratio, using analysts' five-year earnings growth projections, is a super-low 0.5. That ranks AMD among the cheapest AI stocks on the market.
NASDAQ: AMD
Key Data Points
What will drive AMD's growth? Primarily AI. The company expects its revenue from AI data centers will soar by a compound annual growth rate (CAGR) of more than 80% over the next three to five years.
AMD continues to chip away (pun fully intended) at Intel's (INTC 5.75%) server CPU market share. It's also making inroads in the GPU market with its Instinct MI350 Series, the fastest ramping product in the company's history.
2. Micron Technology
The old way of thinking: Memory chips are only commodities. The new way of thinking: Memory chips are hot commodities, thanks to AI. As a top supplier of high-bandwidth memory (HBM), Micron Technology (MU 3.21%) is also a hot commodity.
But Micron isn't a costly commodity. Its PEG ratio is a hair below 0.7. Shares trade at only 12.3 times forward earnings.
NASDAQ: MU
Key Data Points
Perhaps the supply of HBM will outstrip demand at some point in the future. However, it doesn't seem likely to happen anytime soon. Micron has already signed contracts for its entire 2026 HBM supply. CEO Sanjay Mehrotra said in the fiscal 2026 first-quarter earnings call in December, "Sustained and strong industry demand, along with supply constraints, are contributing to tight market conditions, and we expect these conditions to persist beyond calendar 2026."
Not long ago, Micron predicted that the total addressable market for HBM would reach $100 billion in 2030. Now, though, the company expects to hit that mark by 2028, reflecting a CAGR of roughly 40%.
3. Nvidia
Stock valuation expert Aswath Damodaran has gone on record several times stating that Nvidia (NVDA 1.50%) was priced at a steep premium to its intrinsic value. I agreed with him in the past, but not now. Why did I change my mind? Nvidia's staggering growth prospects.
The GPU stock's PEG ratio is 0.7. Wall Street expects Nvidia to deliver strong growth over the next five years. I think this optimism is warranted.
NASDAQ: NVDA
Key Data Points
CFO Colette Kress reiterated in the third-quarter earnings call that Nvidia projects $3 trillion to $4 trillion in annual AI infrastructure spending by the end of the decade. This estimate isn't unrealistic, in my view, especially with new technologies such as agentic AI gaining momentum.
Can Nvidia continue to dominate the AI chip market, though, with rising competition from AMD, Broadcom (AVGO 1.70%), and others? The odds look good that it will. Nvidia's Blackwell GPUs are the most powerful AI chips on the market. The company will launch its even more advanced Rubin GPUs later this year. With Nvidia's heavy investments in research and development, I expect it will remain the top player in AI chips for years to come.
