Exploring Undervalued AI Stocks: Opportunities for Investors
The artificial intelligence (AI) revolution is reshaping the modern landscape at an extraordinary speed. As AI technology develops further, it is poised to change multiple industries through improved automation, operational efficiency, and significant gains in workforce productivity.
Since the launch of ChatGPT in January 2023, investors have surged toward companies leading the AI charge, leading to considerable valuation increases in the sector. Despite this excitement, several promising AI firms remain undervalued relative to their long-term potential.
Strategic Opportunities in AI
Two companies stand out for their strategic positions within the AI value chain. Both are uniquely situated to benefit from the growing use of AI in various markets, yet their current valuations do not reflect their competitive strengths and growth potential. For investors seeking entry into the AI revolution at reasonable prices, these two stocks are noteworthy considerations.
The Nuclear Energy Disruptor
Oklo (NYSE: OKLO) exemplifies a dynamic fusion of AI and advanced nuclear technology. This company utilizes sophisticated AI algorithms to innovate in the design and operational efficiency of compact fast reactors. These cutting-edge micro-reactors are engineered to provide clean, reliable power directly to energy-intensive data centers.
This capability tackles a critical issue in the AI revolution: its enormous energy demands. According to the Center on Global Energy Policy, U.S. data centers might require over 14 gigawatts of new capacity by 2030, equivalent to the electricity needed for about 10.5 million homes. The issue is even starker internationally; for instance, data centers in Ireland could consume up to 32% of the nation’s total electricity generation.
Oklo’s advantages lie in its speed and precision. Its AI-driven design process shortens development timelines and reduces costs in an otherwise sluggish industry often hindered by delays and regulatory challenges. Furthermore, its micro-reactors can be deployed on-site, minimizing transmission losses and providing local, carbon-free energy for AI infrastructure.
Although Oklo’s stock has risen 32% year-to-date as of May 9, 2025, the company’s market capitalization holds at just $3.9 billion. This valuation appears significantly low given the imminent energy challenges that may hinder AI’s growth. With the escalating computing needs for advanced AI systems, Oklo’s technology stands out as not just an energy solution but a pivotal enabler for the next phase of AI development.
The Drug Discovery Pioneer
Recursion Pharmaceuticals (NASDAQ: RXRX) is transforming drug development through industrial-scale AI applications. At its core is the Recursion OS, a proprietary platform that merges vast biological and chemical datasets with one of the world’s most powerful supercomputers. This system performs millions of automated wet-lab experiments each week, using machine learning to uncover trillions of relationships across human biology and chemistry.
In May 2025, Recursion announced a refined focus on key clinical programs in oncology and rare diseases while strategically narrowing its pipeline based on data analysis. Its leading candidates — including REC-4881 for familial adenomatous polyposis and REC-7735 for breast cancer — are showing encouraging early results.
The growing ecosystem of partnerships also enhances Recursion’s position. Recently, the company received a $7 million milestone payment from Sanofi and is making strides with collaborations involving Roche and Merck KGaA.
By adopting an AI-driven strategy, Recursion accelerates therapeutic discovery and significantly lowers development costs—crucial in the high-stakes, capital-intensive pharmaceutical industry. With $509 million in cash and a runway extending into mid-2027, Recursion has sufficient resources to navigate market fluctuations while pushing forward its innovative platform and promising pipeline.
Despite compelling growth prospects, shares have fallen 35% year-to-date, resulting in a market cap of just $1.76 billion, indicating a valuation gap that represents a pivotal opportunity for investors. As AI continues to reshape traditional drug discovery methodologies, Recursion emerges as a notably undervalued leader at the intersection of machine learning and medicine, positioned to unveil the next wave of precise therapeutics.
Final Considerations for Investors
Before making investment decisions regarding Oklo, it’s prudent to evaluate overall market recommendations:
The analyst team at Motley Fool Stock Advisor recently recognized their selection of the 10 best stocks to buy, revealing that Oklo did not make the list. The stocks that did may yield significant returns in the coming years.
For instance, if you invested $1,000 in Netflix when it made this list on December 17, 2004, that stake could be worth $614,911 today!
Similarly, a $1,000 investment in Nvidia on its inclusion on April 15, 2005, could have grown to $714,958!
Note that Stock Advisor boasts a total average return of 907%, substantially outperforming the S&P 500’s 163%. Keep an eye on their current top 10 list for potential opportunities.
George Budwell has no positions in any of the stocks mentioned. The Motley Fool recommends Roche Holding AG and has a disclosure policy.
The views and opinions presented here are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
