Several great AI stocks are trading at a discount right now. The market is in a "show me" condition, and unless companies are producing massive profits from their AI spending, the market isn't impressed.
Two stocks that have sold off as a result of this sentiment are Microsoft (MSFT 0.75%) and Meta Platforms (META 2.52%). Each of these stocks looks like a tremendous value right now, and investors should be racing to scoop up these deals before they're gone.
Image source: Getty Images.
Microsoft
Microsoft has been a hot name in the AI investing realm for a while. While it isn't competing directly in generative AI with its own large language model, the company has become a top option to train and run AI workloads on its cloud computing platform, Azure. Azure offers many of the leading AI models on its platform, despite Microsoft being a large investor in OpenAI.
Microsoft is staying neutral in the AI race, which is a great position to be in. Microsoft is also doing quite well, with revenue rising 17% during its last quarter, and Azure's increase an impressive 39% year over year. Despite this strength, Microsoft's stock trades at a price-to-earnings ratio seldom seen during the past decade.
MSFT PE Ratio data by YCharts.
It's a rare occurrence for Microsoft's stock to trade for less than 25 times earnings, yet investors can scoop up the stock at that price tag today. Now is the time to load up on Microsoft stock, as deals like this don't come around often.
NASDAQ: MSFT
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Meta Platforms
Meta Platforms is the company formerly known as Facebook. It owns social media platforms like Facebook, Instagram, Threads, WhatsApp, and Messenger. These social media platforms generate the bulk of Meta's revenue through ad sales, yet those aren't the areas investors are focused on.
Instead, investors are focused on Meta's AI spending, which is quite large. This isn't the first time Meta has attempted to invest in cutting-edge technology. It invested heavily in the metaverse (thus the name change), and in AR (augmented reality) and VR (virtual reality) headsets that never really caught on.
NASDAQ: META
Key Data Points
However, Meta has taken a lot of these lessons learned and applied them to its AI endeavors, and it could yield an AI wearable that dominates the market. We'll see if that catches on, since it could be several years before a product hits the market.
Until then, investors will need to value the business based on what it will look like for the foreseeable future. From that perspective, Meta's stock trades at 21 times forward earnings.
META PE Ratio (Forward) data by YCharts.
For comparison, the S&P 500 (^GSPC 1.52%) trades for 21.9 times forward earnings, so Meta is actually cheaper than the market. I think this is an attractive risk-reward profile, as you get the upside of an AI play with the domain of a strong advertising company. Meta makes a lot of sense to invest in right now, and it looks like a great buy alongside Microsoft.
