Despite Market Volatility, AI Stocks Present Strong Long-Term Opportunities

The recent broad market sell-off has significantly impacted technology stocks. Currently, the S&P 500 is down roughly 11% from its peak, while the tech-heavy Nasdaq Composite index has fallen about 15%. This more significant decline aligns with a general increase in investor risk aversion.

Consequently, stocks focused on artificial intelligence (AI), which enjoyed a thriving market presence over the past few years, are also facing downward pressure. Nevertheless, the long-term outlook for AI adoption remains robust. Grand View Research forecasts an impressive 36% annual growth rate in this sector through 2030.

Market Opportunities in AI Stocks

Companies involved in AI hardware and software are poised for substantial long-term growth. Hence, this may be an opportune time to explore various attractive AI stocks that have dipped in 2025 yet hold significant potential for future appreciation due to the expansive market opportunities available.

1. Advanced Micro Devices

Shares of Advanced Micro Devices (NASDAQ: AMD) have seen a nearly 29% drop in 2025 thus far. Presently, AMD trades at a compelling 19 times forward earnings, notably below the Nasdaq-100 index’s forward earnings multiple of 24. The company is undervalued in light of its expected growth over the next five years, further evidenced by a price/earnings-to-growth (PEG) ratio of just 0.35 based on projected earnings growth, according to Yahoo! Finance.

Analysts project AMD’s earnings will rise by 36% to $4.51 per share this year. Growth is expected to continue in the following years despite some recent downgrades due to economic pressures linked to tariffs and trade disputes.

AMD EPS Estimates for Current Fiscal Year data by YCharts.

Adverse factors, such as tariffs on semiconductors and other components, could disrupt AMD’s sales and earnings growth. The company may either raise prices or absorb increased costs. However, the current administration has temporarily exempted semiconductors from tariffs and paused various tariffs to allow for negotiations.

While the outcomes of these negotiations remain uncertain, the government’s willingness to engage with trade partners raises the prospect for favorable resolutions. Moreover, tech companies are expected to persist in their investments in AI infrastructure despite these tariff-related challenges. AMD anticipates announcing a 30% year-over-year revenue increase next month, confirming its positive outlook amid robust demand for AI server CPUs and graphics processing units.

In addition to AI, AMD also stands to gain from catalysts like a rising number of design wins in the embedded chip market and the forthcoming gaming console upgrade cycle.

Thus, AMD offers more than just AI potential—investors searching for growth stocks at appealing valuations may find it a worthwhile consideration.

2. DigitalOcean

DigitalOcean (NYSE: DOCN) provides on-demand cloud computing infrastructure targeting small businesses, developers, and start-ups, and has recently ventured into AI solutions. In October, the company launched Droplets, an AI infrastructure platform enabling customers to rent cloud capacity to train and deploy large language models (LLMs).

The strong demand for Droplets has led to challenges in meeting capacity needs, as clients can deploy AI applications without the investment in costly hardware. In response, DigitalOcean is focusing on expanding its AI infrastructure capabilities.

Additionally, DigitalOcean offers a more powerful cloud infrastructure option called Bare Metal GPUs. This solution is geared towards customers requiring high performance and customization for demanding AI workloads.

With AI hardware investments in place, DigitalOcean is well-positioned for growth as global market demand expands. According to Goldman Sachs, the cloud infrastructure-as-a-service (IaaS) market could reach approximately $580 billion by the end of the decade.

The integration of AI tools into its offerings is fueling stronger customer spending for DigitalOcean. In the fourth-quarter earnings report, the company noted that a significant lift in AI contributed to a 37% year-over-year revenue growth among its top 500+ customers, which make up 22% of total revenue.

The average revenue per customer also surged 14% year-over-year. As DigitalOcean continues to deepen its AI commitment with the introduction of agentic AI solutions, it remains well-positioned to capitalize on the evolving market landscape.

DigitalOcean’s Growth Potential Amid Rising Customer Spending

Analysts observe customer spending is increasing significantly with DigitalOcean, as more clients continue to sign up for its services. This trend is prompting expectations for improved bottom-line growth for the company.

DOCN EPS Estimates for Current Fiscal Year data by YCharts.

Currently trading at just 13.5 times forward earnings following a recent pullback, investors may find this an advantageous moment to acquire DigitalOcean stock. The increasing demand for AI services in the cloud could drive significant long-term growth for the company.

Evaluating an Investment in Advanced Micro Devices

Before considering an investment of $1,000 in Advanced Micro Devices, it’s important to review recent recommendations. The Motley Fool Stock Advisor analyst team has identified their top picks for investors, and Advanced Micro Devices does not feature among those selections. The ten stocks highlighted could yield impressive returns in the years ahead.

For context, when Netflix was selected for this list on December 17, 2004, an initial investment of $1,000 would have ballooned to an astounding $591,533 by today!* Similarly, Nvidia, recommended on April 15, 2005, would have transformed a $1,000 investment into $652,319!*

It is noteworthy that Stock Advisor’s average return is 859%, significantly outpacing the S&P 500’s 158% return. Staying updated with the latest top 10 list could provide strategic insights for investors.

**See the 10 stocks »**

*Stock Advisor returns as of April 21, 2025

Harsh Chauhan has no positions in any of the stocks mentioned. The Motley Fool recommends Advanced Micro Devices, DigitalOcean, and Goldman Sachs Group. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.