5 Best AI Stocks to Buy for Bargain Prices in 2023

Why PEG Ratios Matter in the AI Sector

In the rapidly growing artificial intelligence (AI) market, finding bargains isn't always straightforward. One effective method is to look at the price/earnings-to-growth (PEG) ratio. Stocks with PEG ratios under 1 are generally considered undervalued. This metric takes into account both the price-to-earnings (P/E) ratio and the earnings growth rate, providing a more comprehensive view of a stock's value.

Top 5 AI Stocks with Low PEG Ratios

Advanced Micro Devices (AMD)

AMD stands out with a forward PEG ratio of only 0.2 based on its projected 2026 growth. The company has shown robust revenue growth, with a 36% increase to $7.44 billion last quarter, and a 57% surge in data center segment revenue to $3.7 billion. AMD's strength lies in its positioning within server central processing units (CPUs) and graphics processing units (GPUs).

The shift from AI training to inference, which is expected to be a much larger market, presents a significant opportunity for AMD. Inference requires less technical complexity, focusing on latency, power consumption, and cost efficiency, allowing AMD to take market share in the GPU space.

Broadcom

Broadcom is another chip stock with a low PEG ratio and strong growth potential. The company reported a 25% revenue increase to $14.9 billion last quarter, driven by a 70% surge in networking revenue. Broadcom's foray into custom AI chips could further boost its growth. These chips are designed for specific AI applications, providing a competitive edge in the AI market.

Nvidia

Nvidia, a leader in AI and GPU technology, also offers a compelling investment opportunity with a forward PEG ratio of around 1.5. The company's GPUs are widely used in AI training and inference, making it a key player in the AI revolution. Nvidia's revenue has consistently grown, driven by demand for its advanced computing solutions.

Salesforce

Salesforce, a software-as-a-service (SaaS) giant, has integrated AI into its customer relationship management (CRM) solutions, enhancing its value proposition. The company's revenue has grown steadily, and its AI capabilities have made it a leader in the SaaS market. Salesforce's AI offerings, such as Einstein, provide businesses with powerful tools for data analysis and customer engagement.

Adobe

Adobe, another SaaS company, has also embraced AI to enhance its creative and marketing solutions. The company's AI-driven tools, such as Adobe Sensei, help users automate tasks, improve content creation, and gain insights from data. Adobe's stock has fallen into the bargain bin, making it an attractive buy for investors looking to capitalize on AI growth.

Why These Stocks Are Worth Considering

Each of these companies offers unique value propositions in the AI space. AMD and Broadcom are well-positioned in the chip market, while Nvidia leads in GPU technology. Salesforce and Adobe bring AI to the SaaS world, providing essential tools for businesses. With their low PEG ratios, these stocks represent excellent opportunities for investors seeking to capitalize on the AI revolution.

Conclusion

The AI market is poised for significant growth, and these five stocks—AMD, Broadcom, Nvidia, Salesforce, and Adobe—offer compelling value with their low PEG ratios. By considering these stocks, investors can position themselves to benefit from the AI wave while taking advantage of current bargain prices.