3 Undervalued AI Stocks to Buy Right Now
Key Points
Microsoft is valued at historically cheap levels.
Nvidia trades for the same price as the S&P 500.
Micron is still working through a huge demand spike.
Finding undervalued artificial intelligence (AI) stocks hasn't been possible for most of the AI build-out that has taken shape since 2023. However, with markets generally weak right now, there are fantastic investment opportunities everywhere.
Three stocks that I have my eye on in April are Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Micron Technology (NASDAQ: MU). I think all three of these companies are substantially undervalued, and once the market returns to AI stocks, they could deliver rapid gains in a short time.
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Image source: Getty Images.
Microsoft
Microsoft is by far the easiest company to make an undervaluation case for. While Microsoft is leaning into the AI build-out by spending big on AI computing infrastructure to host AI workloads, it's primarily partnering with AI model creators rather than building and promoting its own flagship generative AI models. By acting as a host and receiving rental payments either in the form of equity or cash from some of the largest generative AI companies, Microsoft is benefiting from the AI arms race in the smartest way possible -- by being a facilitator.
This approach is mostly recognized through its cloud computing platform, Azure. Azure's revenue was up 39% in Microsoft's latest quarter, showcasing how much demand there is for AI computing power. Overall, Microsoft's revenue rose 17% year over year. Those are both strong figures, and investors can't really ask for or expect much more. Still, the stock is massively selling off and is now down over 30% from its all-time high.
After the sell-off, Microsoft is approaching the lowest price-to-earnings multiple it has experienced over the past decade.
MSFT PE Ratio data by YCharts
I think this is a clear buying opportunity for Microsoft's stock, and investors should take action now in preparation for the stock rising back to a more historically normal valuation multiple.
Nvidia
Nvidia is in the midst of a unique growth opportunity, as it's the key computing unit supplier for many companies that are increasing their AI computing power. Nvidia is hands-down the most popular computing unit option available, and its market dominance will continue to grow with its next generation of chips, Rubin.
Last year, Nvidia told investors that it expects chip sales of Rubin and its current Blackwell architecture to reach $500 billion by the end of 2026. Now, it is telling investors that the figure will be $1 trillion by the end of 2027. That's a massive growth opportunity, yet it isn't being priced into Nvidia's stock at all.
NVDA PE Ratio (Forward) data by YCharts
Nvidia trades for 20.6 times forward earnings -- the same price tag as the S&P 500 (SNPINDEX: ^GSPC). This modest growth-adjusted ratio indicates the market expects Nvidia to have strong growth this year but nothing impressive thereafter. However, that likely won't happen due to the massive growth of Nvidia's chip sales.
Right now is the perfect buying opportunity for Nvidia's stock, as the market isn't pricing in much success next year.
Micron
Last is Micron Technology. At first glance, you may be surprised that Micron trades for a mere 6.1 times forward earnings. However, that's because it operates in the memory market, which is historically cyclical. Still, that doesn't mean there isn't a multiyear demand spike for memory capacity. By 2028, Micron expects the global high-bandwidth memory (HBM) market to be about $100 billion, up from $35 billion in 2025.
That's a tripling in the market in just a few years, and Micron and its peers cannot even meet demand right now. While some may argue that Google's new TurboQuant algorithm reduces memory demand (which it does), the reality is that this algorithm only improves one part of the generative AI ecosystem. There is still a massive memory demand and a huge bottleneck in the market.
I think investors should take this opportunity to grab Micron's stock, as this is a multiyear opportunity that doesn't come around very often.
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Keithen Drury has positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
