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Tech Stocks Bounce Back: Opportunities in AI Investments
In case you missed it, tech stocks are rallying again.
After reaching an all-time high in December, the Nasdaq Composite index experienced a dip in January as DeepSeek disrupted the artificial intelligence (AI) landscape with innovations in training and inference efficiency. Concerns grew by late February about potential impacts from President Donald Trump’s tariffs on major tech companies. The sell-off intensified in April when the announced tariffs were worse than investors had initially feared.
Since then, the Nasdaq has managed to recover about half of its peak-to-trough losses. Currently, the tech-heavy index is just over 12% below its December high. However, there remain numerous promising opportunities in the market. Here are three AI stocks that are still considered undervalued.
Image source: Getty Images.
1. Amazon
Amazon (NASDAQ: AMZN) continues to lead the global cloud computing sector. Its Amazon Web Services (AWS) segment reported $29.3 billion in revenue last quarter, marking a 17% year-over-year increase. Although this growth rate is slower than that of some competitors, AWS remains significantly larger and is currently capacity constrained.
Management anticipates adding more AWS capacity in the second half of the year, planning over $100 billion in capital expenditures by 2025, primarily aimed at expanding AWS facilities. Additionally, Amazon is investing in custom silicon solutions for AI, such as the Trainium and Inferentia machine learning chips. CEO Andy Jassy noted strong adoption of Trainium instances in the market.
A portion of Amazon’s investment is also directed toward enhancing its logistics network. After significant expansion in 2020 and 2021, the focus has shifted to improving efficiency, yielding positive results. Last quarter, shipping costs rose only 3% year-over-year, while paid units increased by 8%.
Long-term, Amazon remains well-positioned. Its dominance in the e-commerce space is secure. Despite potential impacts from tariffs on retail operations, the company’s improved margins allow it to better handle increased costs and fluctuating demand. Moreover, AWS continues to be an essential platform for developers and a key resource for AI services.
Currently, investors can acquire the stock at a relatively low valuation, with its enterprise value below three times estimated 2025 sales—about 10% lower than its long-term average.
2. Lam Research
Lam Research (NASDAQ: LRCX) is a leading manufacturer of semiconductor fabrication equipment, essential for producing high-end AI chips used in data centers.
The company has a strong foothold in memory chip equipment. In the first quarter, 43% of its revenue came from memory chip makers, a figure that has climbed in part due to advancements in AI technology. To achieve peak performance with cutting-edge graphics processing units (GPUs), high-bandwidth memory chips are also required, increasing demand.
Lam is also benefiting from rising demand for its equipment used in general silicon production. As foundries invest to expand their capacities, the company sees increased sales and contract signings. Last quarter, Lam’s revenue increased by 24%, with management predicting growth acceleration in Q2 despite the tariff uncertainties. Operating margins are also expected to improve.
Over the long haul, Lam is in a beneficial cycle. Being a leading supplier to chip manufacturers ensures ongoing revenue growth, enabling further investment in research and development. This bolsters its technological edge and helps secure additional contracts. Consequently, management anticipates an increase in market share within the wafer fabrication equipment sector, outpacing semiconductor industry growth.
Currently, Lam shares are trading significantly lower than their 2024 highs, at a valuation of just 19 times forward earnings estimates. With management expecting double-digit earnings growth over the next four years, this presents a compelling opportunity for investors.
3. Meta Platforms
Meta Platforms (NASDAQ: META), known for Facebook and Instagram, is making substantial investments in AI. During its first-quarter earnings report, management announced an increase in capital expenditures for the year, raising estimates from a range of $60 billion to $65 billion to between $64 billion and $72 billion. While other companies may be increasing spending, they are also renting out computing infrastructure.
These investments are proving beneficial, as Meta experiences significant engagement growth, leading to increased ad impressions across its platforms. Average ad prices are also rising, resulting in a 16% revenue increase last quarter. This performance stands out amid challenges faced by other social media advertising companies.
Furthermore, AI presents even more opportunities for Meta. AI-driven marketing tools can assist advertisers in designing and testing new campaigns, and CEO Mark Zuckerberg envisions a future where Meta’s AI functions as an agent for businesses.
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Meta’s Financial Resilience Amid AI Investments and Growth Potential
Meta continues to explore innovative avenues for engaging clients through tailored campaigns. The use of AI agents in customer service and sales, particularly via Meta’s messaging platforms—WhatsApp and Messenger—holds the potential to generate significant revenue, leveraging the vast user bases of these applications.
Financially, Meta has demonstrated remarkable stability. Despite investing billions in AI and metaverse initiatives, the company has consistently delivered over $10 billion in free cash flow for eight consecutive quarters. This cash flow significantly enhances Meta’s capacity to further invest in technologies that may unlock new growth opportunities.
After a downward trend in 2025, Meta’s stock price has shown signs of recovery, particularly following the release of its Q1 earnings report. Currently, Meta’s stock trades at just 23 times forward earnings estimates. Considering the company’s potential for double-digit earnings growth and its competitive advantages in the tech industry, many analysts find Meta’s stock to be attractively priced.
Capitalizing on Market Opportunities
Investors often reflect on missed opportunities in the stock market. Some may see Meta as an opportunity not to be overlooked. Analysts periodically issue “Double Down” stock recommendations for companies poised for growth. Those hesitant about entering the market may find that now presents a favorable moment for investment.
- Nvidia: If you had invested $1,000 when this recommendation was made in 2009, it could be worth $302,503 today.
- Apple: An investment of $1,000 following the 2008 alert would now stand at $37,640.
- Netflix: A 2004 investment of $1,000 would have grown to $614,911.
Currently, analysts are issuing “Double Down” alerts for three promising companies, making this an opportune moment for investors to evaluate their options.
*Stock Advisor returns as of May 5, 2025.
John Mackey, former CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development for Facebook, is also a board member. Adam Levy has investments in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Lam Research, and Meta Platforms.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.
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