2 Top Bargain AI Stocks Ready for a Bull Run

Key Points

• Alphabet and TSMC are both trading at attractive valuations.

• Alphabet is showing that it can be an AI winner, and a recent court ruling let it preserve its search advantages.

• Without TSMC, the AI boom would not be possible.

• 10 stocks we like better than Alphabet ›

Artificial intelligence (AI) stocks have been on fire this year, but there are still bargains out there. With AI looking like it has the potential to be a once-in-a-generation technological innovation, this is an area where you want to invest.

Let's look at two AI stocks that still look cheap and could have plenty of upside ahead.

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1. Alphabet

Even after its rally this year, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) is still cheap, trading at a forward price-to-earnings (P/E) ratio of around 22.5 based on 2026 estimates. That's a discount to most of its megacap AI peers, despite the fact that Alphabet has a much more diversified business model and arguably the best portfolio of emerging bets with robotaxis and quantum computing.

Investors were worried that AI would eat into Google Search, but search revenue growth actually accelerated last quarter, and new AI features like AI Overviews and AI Mode are driving more queries, not fewer.

The recent Department of Justice ruling also removed the worst-case scenario for the company. Alphabet gets to keep its crown jewels, Chrome and Android, and its search deal with Apple is still largely intact.

That means Alphabet maintains its distribution edge. With Chrome controlling over two-thirds of the browser market and Android powering over nearly three-quarters of smartphones, Google remains the default entry point to the internet for billions of users. Meanwhile, people tend to stick with defaults.

On top of that, Alphabet is quickly integrating AI into search in ways that boost engagement and increase monetization. New features like Lens and Circle to Search are driving incremental queries, often with a shopping intent. That helps feed into one of Alphabet's biggest strengths: its huge global ad network. Alphabet is a master at monetizing search through advertising, and there is no reason it won't be able to apply the same principles when it comes to AI queries.

At the same time, Alphabet's cloud computing business, Google Cloud, is booming. Revenue soared 32% last quarter while segment profits more than doubled. The entire cloud computing industry is currently capacity-constrained, as organizations rush to build and deploy their own AI models and tools. However, once the rush is over, Alphabet has the advantage of being vertically integrated, with everything from its world-class Gemini AI model to custom AI chips that help give it a cost advantage.

Taken altogether, Alphabet is one of the best megacap tech stocks out there, and at its current valuation, it could have a lot more room to run.

2. Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing (NYSE: TSM) is one of the most important companies in the AI space, and at just 23 times 2026 earnings estimates, it is a bargain for a company that makes the AI boom possible.

TSMC is the heart and soul of the semiconductor industry. It manufactures the vast majority of advanced semiconductors for the leading players in the industry. While there are other foundries, none can consistently produce advanced chips at scale with strong yields.

Competitors like Intel and Samsung have tried to catch up but continue to struggle with yield issues. Intel is still losing money in its foundry business, while Samsung has lost key contracts like Google's Tensor G5 chip. For all intents and purposes, this has left TSMC as the only game in town for making advanced chips at scale.

Chip designers are constantly looking to shrink nodes, which is the number of transistors that can fit on a chip. This helps chips become more powerful and energy-efficient, and TSMC has been the only foundry able to deliver adequate yields for chips at smaller nodes.

Demand for AI chips, meanwhile, remains red-hot. Nvidia has predicted that the AI infrastructure market will hit $3 trillion to $4 trillion over the next five years, while TSMC management has forecast that AI chip demand will increase at a more than 40% compounded annual growth rate (CAGR) through 2028. In addition, given its dominant position in the foundry space, TSMC also has strong pricing power, with reports saying it will raise prices by 10% next year.

Beyond AI, TSMC could also benefit from growth in areas like autonomous driving, robotics, and quantum computing. With an attractive valuation, this makes it a top AI stock to own for the long term.

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Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: short August 2025 $24 calls on Intel and short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.