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It might be a bit too soon to write off the big tech companies online.
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Advanced Micro Devices seems to be tackling recent growth issues head-on.
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With lower valuations and a push for diversification, investors could be tempted to look back at Qualcomm.
In recent times, stocks in the artificial intelligence domain have drawn attention for their inflated valuations. Nvidia, for instance, is benefitting from a surge in demand for AI accelerators, while Palantir is being recognized for offering significant productivity gains, causing its ratings to reach unexpected heights. Yet, this surge hasn’t touched all AI stocks, and many seem undervalued. This could present opportunities for companies that investors might have missed, heightening the chances for notable returns in the AI sector. Alphabet (NASDAQ: GOOG), AMD (NASDAQ: AMD), and Qualcomm (NASDAQ: QCOM) could be worth a closer look.
The sight of Alphabet, Google’s parent company, trading at a lower price-to-earnings (P/E) ratio might catch some investors off guard. As a trailblazer in AI since the early 2000s, it’s one of the wealthiest entities out there, boasting $75 billion in free cash flow over the last year and a total of $95 billion on hand. However, there’s skepticism regarding its stock performance, mostly tied to its highly profitable search engine business, which is facing stiffer competition from ChatGPT and has lost some market share recently.
Despite this, Alphabet has been actively trying to pivot away from its dependency on search and the related advertising revenue. As of Q1 2025, advertising accounted for 74% of its revenue, down from 77% the previous year, while Google Cloud’s share grew to 14% from 12% in the same timeframe.
Moreover, Alphabet owns various businesses, and some, like Waymo, the self-driving car venture, have recently been valued at $45 billion. This suggests that considering its financial standing and operational breadth, the current P/E ratio of 19 could actually be quite attractive.
AMD might just be the unexpected star that investors are overlooking. It’s currently a key player in CPUs and has overtaken longstanding giant Intel, even if it’s lagging behind Nvidia in the AI accelerator arena. Recently, though, shares have been sold off, primarily due to challenges in its gaming and embedded segments. Despite a rebound, its price sits at about 50% lower than its peak in early 2024.
On a brighter note, long-term investors are starting to see some positive signs. During the first quarter of 2025, revenues surged by $7.4 billion year-over-year, exceeding a 2% annual growth rate for that quarter. Notably, the data center and client segments saw revenue jumps of 57% and 68% respectively, while declines in embedded segments have tapered off to only 3%. Even gaming revenue, which fell sharply, has shown signs of recovery in recent quarters, signaling a potential turnaround.
The trailing P/E ratio might seem steep at 86, but with a forward P/E of 29—considering the predicted rise in revenues—it could prove quite reasonable. Essentially, the recent uptick in stock prices may very well be just the beginning.
Then there’s Qualcomm, another player feeling a bit of pressure. This giant in smartphone chipsets faces hurdles related to its ties with China and Apple’s shift to in-house chipset production. Still, the market seems to have priced in these concerns, with the stock trading at merely 16 times its revenues and a forward P/E of 13, reflecting ongoing growth.
Additionally, the recent breakthrough with Deepseek, which provides affordable AI technology, couldbenefit Qualcomm’s chipset business as it starts to ride an AI upgrade wave. In fact, this segment was a key factor driving a 17% rise in revenues to $11 billion for the second quarter of fiscal 2025 compared to the previous year.
Qualcomm is also exploring the Internet of Things and automotive sectors, reporting annual revenue increases of 27% and 59% in those areas. This diversification reflects Qualcomm’s strategy to position itself for a future where smartphones might not be the focal point for consumers.
Even though pressures from its relationships with China and the shift by Apple could weigh on Qualcomm, the attractive valuation and rapid growth trajectory might make the stock appealing for potential buyers.
It’s certainly worth considering these factors before making any decisions on Alphabet’s stock.
