AI stocks are some of the hottest stocks on the market these days. Offering high growth, high profit margins, and the chance to finance innovation, they have attracted an outsized proportion of investors’ money in recent years.
Since ChatGPT launched in 2022, AI stocks have outperformed the market. For the most part, the gains were justified by the companies’ underlying earnings growth and margins – particularly in the case of AI chip stocks.
But all good things must come to an end eventually, and the biggest U.S. AI stocks are starting to look mighty pricey today. Names like NVIDIA and Palantir trade well above 20 times sales, and their shares are taking a beating in the market this year. Potentially, the 2025 pullback in U.S. AI stocks is an opportunity to buy at a depressed price. Personally, though, if I were hunting for AI stocks, I’d look in less appreciated corners of the market. With that in mind, here are three overlooked AI stocks worth taking a look at today.
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Kinaxis
Kinaxis Inc (TSX:KXS) is a Canadian supply chain management software company. It uses AI to give users real-time insights into their supply chains. For example, using Kinaxis’ software, a business owner can ask questions about massive amounts of data and get actionable insights on what to do about inventory and supply procurement.
Kinaxis has done a lot of growing in recent years, with revenue compounding at 20% and free cash flow compounding at 46% per year over the last five years. Predictably, KXS stock has made big gains on these results, but still the stock is modestly valued by AI stock standards, trading at 50 times earnings and 6.8 times sales. It might be worth a look.
Shopify
Shopify Inc (TSX:SHOP) is Canada’s biggest tech company, and one of its biggest companies period. It develops an e-commerce web hosting service and payment suite. The service lets businesses host their online stores independently, which confers branding benefits compared to selling on Amazon.
Shopify uses generative AI in several ways, primarily through its “Shopify Magic” suite of features. These features include AI-written product descriptions, AI-generated marketing visuals, and more. It’s a powerful set of features that makes marketing much faster and easier than ever before. At the same time, Shopify is approaching its cheapest ever valuation, trading at 66 times earnings (if that seems high to you remember that this company traded at closer to 60 times sales for most of its history).
Alibaba
Last but not least, we have Alibaba Group Holding (NYSE:BABA). Alibaba is a Chinese e-commerce giant with an attached cloud business, making it sort of like a Chinese Amazon. Alibaba’s Cloud segment has a suite of generative AI offerings that are among the best in their class. It has Qwen, an AI chatbot that tops AI leaderboards for math and coding. It has Wan, and AI video generator. And finally, Alibaba has various AI features embedded into its e-commerce platform, such as “search by image” and AI-based customer service bots. This is a world-class suite of AI features, yet Alibaba trades at just 13 times earnings. The value here is not hard to see.
