Performance of AI Stocks
Over the last three years, artificial intelligence (AI) stocks have emerged as top performers in the stock market, driven by the rapid growth of this technology benefiting numerous companies.
Global X AI & Technology ETF Gains
The Global X Artificial Intelligence & Technology ETF has surged by 118% in the past three years, significantly outperforming the S&P 500, which gained 76% during the same timeframe. This ETF focuses on companies poised to benefit from AI integration in their offerings, as well as those supplying the essential hardware to support AI operations.
Investment Opportunities in AI Stocks
For investors, the good news is that several leading AI stocks are currently available at highly attractive valuations. Notably, Nvidia (NASDAQ: NVDA) and Micron Technology (NASDAQ: MU) represent promising investment options, as both companies are undervalued relative to their growth potential.
Nvidia’s Growth Potential
Nvidia stands out in AI hardware, with its graphics processing units (GPUs) essential for training and operating AI models. Despite a remarkable 654% price increase over the past three years, Nvidia stock can still be purchased for just 22 times forward earnings. The company’s earnings leaped by 60% in the most recent fiscal year (ending January 25, 2026), and analysts predict a further 73% increase in the next fiscal year.
Market Outlook for Nvidia
With forecasts suggesting an annual increase of 40% in data center investments until 2030—potentially reaching $3 trillion to $4 trillion—Nvidia, holding an impressive 81% of the AI chip market, is well-positioned to benefit from this trend. Thus, purchasing Nvidia shares now could be a wise decision.
Micron Technology’s Value Proposition
Similarly, Micron Technology is trading at a compelling 11.5 times forward earnings, substantially below the S&P 500’s average. Analysts project Micron’s earnings to quadruple in the current fiscal year, with a growth expectation of 34% for the next year, far exceeding the S&P 500’s anticipated growth rate.
Conclusion: Buy Recommendations
Micron’s growth forecasts appear to be underestimated, particularly given the ongoing demand-supply imbalance in memory chips expected to last until at least 2028. With a price/earnings-to-growth (PEG) ratio of just 0.64, Micron is considered a strong buy, indicating substantial undervaluation when factoring in its growth potential.
Harsh Chauhan has no stakes in the mentioned stocks. The Motley Fool advocates for Micron Technology and Nvidia.
