<div id="readability-page-1">In recent years, stocks in the artificial intelligence (AI) field have become known for achieving sky-high valuations. Nvidia shot higher amid surprisingly strong demand for AI accelerators, and recently, Palantir's valuation has reached nosebleed levels as its software delivers notable productivity breakthroughs. Still, this success has not applied to all AI stocks, and many appear undervalued. That creates a possible opportunity in companies that investors may have overlooked, increasing the odds that you can generate outsized returns by investing in artificial intelligence. To this end, investors may want to take a closer look at Alphabet (GOOGL 1.32%) (GOOG 1.16%), Advanced Micro Devices (AMD 1.91%), and Qualcomm (QCOM -0.06%). <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MTg2MzYvYWktcm9ib3QtdGVsbHMtcGVyc29uLXNlY3JldC5qcGcmdz03MDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MTg2MzYvYWktcm9ib3QtdGVsbHMtcGVyc29uLXNlY3JldC5qcGcmdz03MDA"/>Image source: Getty Images. </div> <h2>Alphabet</h2> It may surprise some investors to see Google parent Alphabet selling at a P/E ratio of 19. The company is an AI pioneer, first applying the technology in 2001. Moreover, it is one of the more cash-rich businesses in existence, generating $75 billion in free cash flow over the last 12 months and holding $95 billion in liquidity. Still, skepticism about the stock likely relates to the lucrative search business that generated much of that cash. Competition from ChatGPT took its market share in search below 90% for the first time in years, according to Oberlo. However, Alphabet has long made it a goal to become less reliant on search and the corresponding ad business. To that end, advertising was 74% of revenue in the first quarter of 2025, down from 77% in the year-ago quarter. Google Cloud raised its revenue share to 14%, growing from 12% over the same period. Additionally, Alphabet owns numerous businesses, some of which could emerge as primary revenue sources. One of these is autonomous vehicle company Waymo, which investors recently valued at $45 billion during a funding round. Ultimately, when considering the cash position and business, a 19 P/E ratio is a low price to pay for such optionality. <h2>AMD</h2> AMD may be one of the more surprising stocks to be overlooked. It is arguably the most prominent CPU maker, pulling ahead of longtime leader Intel. Also, even though it lags Nvidia in the AI accelerator market, it looks increasingly like a rising player in that industry. Still, investors have sold off the stock in recent months as its gaming and embedded segments suffered. Even with a partial recovery, it sells at an approximate 50% discount from its all-time high in early 2024. Nonetheless, the stock's long-term investors may now see signs of hope. In the first quarter of 2025, revenue of $7.4 billion increased by 36% yearly, far above the 2% annual increase in the year-ago quarter. Its data center and client segments remained robust, growing revenue by 57% and 68%, respectively. Also, the embedded segment has begun to pare losses, with its annual decline down to 3%. Moreover, the 30% yearly decline in gaming revenue is an improvement over past quarters, likely meaning these segments are finally emerging from their down cycles. Finally, while its 86 trailing P/E ratio may look pricey, a forward P/E ratio of 29 may make the stock inexpensive, given the company's improving revenue growth. That means the recent rise in the stock price should probably continue. <h2>Qualcomm</h2> Another AI stock that suffers from negative sentiment is Qualcomm. The smartphone chipset giant faces some notable headwinds with its extensive ties to China and the decision by Apple to develop chipsets in-house. Nonetheless, one can argue that the stock price accounts for these factors (and then some). The stock trades at just 16 times earnings, and the forward P/E ratio of 13 indicates its profit growth will continue. Moreover, DeepSeek's breakthrough earlier this year offers lower-cost AI technology, presumably making AI accessible to more users. That bodes well for Qualcomm's chipset business, which has begun to benefit from an AI-driven upgrade cycle. The chipset business was the primary reason its revenue in the second quarter of fiscal 2025 (ended March 30) rose 17% annually to $11 billion. Furthermore, Qualcomm has made strides in its Internet of Things and automotive businesses. These enterprises grew revenue on a yearly basis by 27% and 59%, respectively, which bodes well for Qualcomm's efforts to prepare for a day when smartphones are less critical to consumers. Indeed, the ties to China and Apple's decision to drop Qualcomm have likely pressured Qualcomm stock. Still, considering the low P/E ratio and fast growth of its businesses, the stock looks increasingly like a buy. </div>

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The article discusses three undervalued AI stocks with long-term potential: Alphabet, AMD, and Qualcomm. Alphabet, trading at a P/E ratio of 19, is diversifying beyond its search business, while AMD shows signs of recovery with a 36% revenue increase. Qualcomm, despite challenges, trades at a low P/E of 16 and benefits from an AI-driven upgrade cycle. These companies present opportunities for investors looking to capitalize on the AI sector's growth.

- Recent valuations in the artificial intelligence (AI) sector have varied, with Nvidia and Palantir seeing significant increases, while other stocks remain undervalued, presenting investment opportunities.  
- Companies like Alphabet, Advanced Micro Devices (AMD), and Qualcomm are highlighted for their potential, with Alphabet showing a low P/E ratio despite strong cash flow and growth in Google Cloud.  
- AMD is recovering from a downturn with impressive revenue growth, while Qualcomm's low P/E ratio and expanding businesses suggest it may be undervalued despite challenges.

Undervalued and Overlooked: 3 AI Stocks With Long-Term Upside