Two AI Stocks Frequently Overlooked Yet Harboring Potential for Long-term Growth
In the rapidly evolving world of artificial intelligence (AI), two tech giants - Alphabet (GOOG, GOOGL) and Adobe (ADBE) - are making significant strides. Both companies are recognised as leaders in their respective fields, with Alphabet dominating search, advertising, cloud, and AI infrastructure, and Adobe leading the way in creative software and digital media tools with substantial AI integration. However, the question remains: are these tech titans undervalued in the AI sector, making them attractive investment opportunities?
### Alphabet (GOOGL, GOOG): Valuation and Outlook
Alphabet, the parent company of Google, is generally viewed as fairly valued rather than deeply undervalued. The stock is trading just above its 50-week moving average, with a 14-week RSI around 55, indicating it is fairly valued at current levels. Wall Street analysts have a "Strong Buy" consensus, with an average 12-month price target suggesting about 11% upside.
Analysts forecast normalized earnings growth of 19.5% for fiscal 2025. Over the next few years, investors might expect annual price returns around 15%, which is solid but not extraordinary for a tech growth stock. This is supported by continued revenue growth in core advertising and strong gains in Google Cloud, where Q1 2025 revenue grew 28% year-over-year and operating margins reached multiyear highs.
Despite concerns about rising AI competition in search, Alphabet’s proactive management and diversified portfolio (including YouTube, Cloud, Waymo, and quantum computing) provide resilience.
While Alphabet is not glaringly undervalued, it remains a strong core holding given its quality, growth, and defensive characteristics. It could be a reasonable choice for moderate-growth, risk-averse investors, but elite growth seekers might find higher upside elsewhere.
### Adobe (ADBE): No Clear Valuation Picture
Unfortunately, the search results do not provide a clear picture of Adobe’s (ADBE) valuation, growth prospects, or AI positioning. As such, it is not possible to determine whether Adobe is undervalued, fairly valued, or overvalued relative to its AI leadership and market position based on these sources. Any assessment beyond this would require additional data.
In conclusion, while Alphabet is generally considered a high-quality, resilient growth stock with clear AI leadership, making it a strong choice for a balanced portfolio, further research is needed to assess Adobe's valuation and investment merits.
Investment decisions should always consider broader market trends, individual risk tolerance, portfolio diversification, and more detailed fundamental analysis. The AI leadership of both companies is clear, but undervaluation specifically is supported only for Alphabet in the context of growth and resilience, not deep discounting. For Adobe, further research is needed.
- Even though Alphabet's stock is not considered deeply undervalued, its AI leadership, growth, and defensive characteristics make it a strong choice for moderate-growth, risk-averse investors.
- In contrast, the valuation and investment merits of Adobe, being a leader in creative software and digital media tools with substantial AI integration, remain unclear due to a lack of comprehensive data, and further research is required to determine its undervaluation or otherwise.
