The Best AI Stocks to Buy Now
Summary Overview
The article identifies top undervalued stocks poised to benefit from the continued development and adoption of artificial intelligence (AI). These stocks were selected based on:
• Their inclusion in the Morningstar Global Next Generation Artificial Intelligence Index.
• Strong analyst ratings (4 or 5 stars from Morningstar).
• Undervaluation relative to fair value estimates as of June 6, 2025.
While the AI market remains young and volatile, the article emphasizes that some key players are already delivering strong fundamentals and innovation in AI-driven technology.
Market Context
• AI sector performance (YTD as of June 6, 2025):
+10.41% (Morningstar AI Index) vs. +2.51% (Broad US Market Index).
• Challenges faced:
• News from China’s DeepSeek AI lab in January.
• Tariff-related investor sentiment in April.
Despite these, strong AI companies have remained attractive due to long-term demand and innovation potential.
Company-by-Company Breakdown
1. Amazon.com (Ticker: AMZN)
• Morningstar Rating: ★★★★
• Moat: Wide
• Undervalued by: 11% (vs. fair value of $240)
AI Angle:
• AI powers Amazon Web Services (AWS) — the dominant cloud provider, a backbone for many AI applications.
• The advertising segment, supported by AI-driven consumer insights, is growing rapidly.
• Amazon uses AI across logistics, recommendation engines, and product development.
Why it’s a top pick:
Its dual strength in cloud infrastructure and advertising gives it high-margin growth potential beyond retail.
2. Alphabet (GOOGL/GOOG)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 27% (vs. $237 fair value)
AI Angle:
• Google is seen as a pioneer in AI through Google Search, Google Cloud, DeepMind, and Gemini (its LLM).
• AI enhances search quality, ad targeting, and cloud solutions.
Why it stands out:
AI is central to Alphabet’s strategy. It leverages AI not just for user experience but also for advertising monetization and data services.
3. Taiwan Semiconductor Manufacturing (TSMC)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 22% (vs. $262 fair value)
AI Angle:
• Supplies cutting-edge chips that power AI models and cloud infrastructure (used by NVIDIA, AMD, Apple).
• Crucial for both training and inference in AI applications.
Why it’s essential:
It’s the manufacturing backbone of the AI industry, with global demand despite geopolitical tension.
4. Tencent Holdings (TCEHY)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 27% (vs. $91 fair value)
AI Angle:
• AI fuels Tencent’s ad technology, content recommendations, and gaming.
• Strong influence in China’s internet space gives it massive data advantage.
Key value driver:
AI enhances monetization efficiency and user engagement across WeChat and other platforms.
5. Adobe Inc. (ADBE)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 29% (vs. $590 fair value)
AI Angle:
• Integrated Firefly AI into Photoshop and Illustrator.
• Tools automate complex creative tasks like image editing, video production, and content personalization.
Why it shines:
Adobe’s AI empowers millions of creators—cementing its dominance in creative software.
6. Alibaba Group (BABA)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 20% (vs. $150 fair value)
AI Angle:
• Operates Alibaba Cloud, a major cloud provider in Asia with AI capabilities.
• Uses AI for logistics, fraud detection, and personalizing the e-commerce experience.
Strength:
AI streamlines operations across its massive commerce ecosystem and supports enterprise AI tools in China.
7. Marvell Technology (MRVL)
• Not detailed in full, but generally known for:
• Producing semiconductors for data centers, 5G, and AI accelerators.
• Supplying components to major AI infrastructure providers.
8. Baidu Inc. (BIDU)
• Likely included for:
• Ernie Bot: China’s answer to ChatGPT.
• Strong AI research and development in NLP, autonomous driving, and cloud AI services.
9. EPAM Systems (EPAM)
• Known for:
• Digital transformation consulting.
• Providing custom AI software development for large enterprises.
Key Concepts & Takeaways
1. Undervaluation & Star Ratings Matter
Each stock is undervalued relative to Morningstar’s fair value estimates and has high conviction ratings (4–5 stars), suggesting good entry points.
2. Wide Economic Moats Are Key
These companies have durable competitive advantages—from proprietary technology to dominant ecosystems.
3. AI Is an Enabler, Not a Product Alone
Whether it’s Amazon’s logistics, Adobe’s creative tools, or TSMC’s chips, AI is used to enhance existing offerings, not just as a standalone product.
4. Diversification in AI Investment
The list covers:
• Software (Adobe, EPAM)
• Hardware (TSMC, Marvell)
• Cloud & E-commerce (Amazon, Alibaba)
• Content & Ads (Alphabet, Tencent, Baidu)
Final Word
If you’re investing in AI, don’t just chase hype—focus on companies with strong fundamentals, a wide moat, and tangible AI integration.
Summary Overview
The article identifies top undervalued stocks poised to benefit from the continued development and adoption of artificial intelligence (AI). These stocks were selected based on:
• Their inclusion in the Morningstar Global Next Generation Artificial Intelligence Index.
• Strong analyst ratings (4 or 5 stars from Morningstar).
• Undervaluation relative to fair value estimates as of June 6, 2025.
While the AI market remains young and volatile, the article emphasizes that some key players are already delivering strong fundamentals and innovation in AI-driven technology.
Market Context
• AI sector performance (YTD as of June 6, 2025):
+10.41% (Morningstar AI Index) vs. +2.51% (Broad US Market Index).
• Challenges faced:
• News from China’s DeepSeek AI lab in January.
• Tariff-related investor sentiment in April.
Despite these, strong AI companies have remained attractive due to long-term demand and innovation potential.
Company-by-Company Breakdown
1. Amazon.com (Ticker: AMZN)
• Morningstar Rating: ★★★★
• Moat: Wide
• Undervalued by: 11% (vs. fair value of $240)
AI Angle:
• AI powers Amazon Web Services (AWS) — the dominant cloud provider, a backbone for many AI applications.
• The advertising segment, supported by AI-driven consumer insights, is growing rapidly.
• Amazon uses AI across logistics, recommendation engines, and product development.
Why it’s a top pick:
Its dual strength in cloud infrastructure and advertising gives it high-margin growth potential beyond retail.
2. Alphabet (GOOGL/GOOG)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 27% (vs. $237 fair value)
AI Angle:
• Google is seen as a pioneer in AI through Google Search, Google Cloud, DeepMind, and Gemini (its LLM).
• AI enhances search quality, ad targeting, and cloud solutions.
Why it stands out:
AI is central to Alphabet’s strategy. It leverages AI not just for user experience but also for advertising monetization and data services.
3. Taiwan Semiconductor Manufacturing (TSMC)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 22% (vs. $262 fair value)
AI Angle:
• Supplies cutting-edge chips that power AI models and cloud infrastructure (used by NVIDIA, AMD, Apple).
• Crucial for both training and inference in AI applications.
Why it’s essential:
It’s the manufacturing backbone of the AI industry, with global demand despite geopolitical tension.
4. Tencent Holdings (TCEHY)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 27% (vs. $91 fair value)
AI Angle:
• AI fuels Tencent’s ad technology, content recommendations, and gaming.
• Strong influence in China’s internet space gives it massive data advantage.
Key value driver:
AI enhances monetization efficiency and user engagement across WeChat and other platforms.
5. Adobe Inc. (ADBE)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 29% (vs. $590 fair value)
AI Angle:
• Integrated Firefly AI into Photoshop and Illustrator.
• Tools automate complex creative tasks like image editing, video production, and content personalization.
Why it shines:
Adobe’s AI empowers millions of creators—cementing its dominance in creative software.
6. Alibaba Group (BABA)
• Rating: ★★★★
• Moat: Wide
• Undervalued by: 20% (vs. $150 fair value)
AI Angle:
• Operates Alibaba Cloud, a major cloud provider in Asia with AI capabilities.
• Uses AI for logistics, fraud detection, and personalizing the e-commerce experience.
Strength:
AI streamlines operations across its massive commerce ecosystem and supports enterprise AI tools in China.
7. Marvell Technology (MRVL)
• Not detailed in full, but generally known for:
• Producing semiconductors for data centers, 5G, and AI accelerators.
• Supplying components to major AI infrastructure providers.
8. Baidu Inc. (BIDU)
• Likely included for:
• Ernie Bot: China’s answer to ChatGPT.
• Strong AI research and development in NLP, autonomous driving, and cloud AI services.
9. EPAM Systems (EPAM)
• Known for:
• Digital transformation consulting.
• Providing custom AI software development for large enterprises.
Key Concepts & Takeaways
1. Undervaluation & Star Ratings Matter
Each stock is undervalued relative to Morningstar’s fair value estimates and has high conviction ratings (4–5 stars), suggesting good entry points.
2. Wide Economic Moats Are Key
These companies have durable competitive advantages—from proprietary technology to dominant ecosystems.
3. AI Is an Enabler, Not a Product Alone
Whether it’s Amazon’s logistics, Adobe’s creative tools, or TSMC’s chips, AI is used to enhance existing offerings, not just as a standalone product.
4. Diversification in AI Investment
The list covers:
• Software (Adobe, EPAM)
• Hardware (TSMC, Marvell)
• Cloud & E-commerce (Amazon, Alibaba)
• Content & Ads (Alphabet, Tencent, Baidu)
Final Word
If you’re investing in AI, don’t just chase hype—focus on companies with strong fundamentals, a wide moat, and tangible AI integration.