Artificial intelligence (AI) stocks have been a hot topic, with some names like Nvidia soaring to sky-high valuations. But for savvy investors, the real opportunities lie in undervalued gems that haven’t yet caught the market’s full attention. Drawing inspiration from sources like PositiveStocks and Trader’s Alley, we’ve curated a list of four AI stocks, including a data center play like Digital Realty, that appear undervalued based on recent analyses and market trends. These companies offer a compelling mix of innovation, solid fundamentals, and reasonable valuations, making them prime picks for long-term upside. Let’s dive into the details.
1. Alphabet (GOOGL)
Why It’s Undervalued: Alphabet, the parent company of Google, is a tech behemoth often overshadowed in the AI conversation by pure-play chipmakers. Its extensive AI investments—particularly in Google Search, cloud computing, and autonomous driving via Waymo—make it a powerhouse. As of July 2025, Morningstar analysts noted that Alphabet trades 25% below their fair value estimate of $237 per share, suggesting significant upside potential.
AI Edge: Alphabet’s AI initiatives are woven into its ecosystem. Google Search leverages advanced algorithms to maintain its dominance, while Google Cloud is rapidly expanding its AI offerings, competing with AWS and Azure. Waymo’s autonomous driving tech, powered by AI, positions Alphabet as a leader in a high-growth sector. With tens of billions in annual free cash flow, Alphabet has the resources to keep pushing the AI envelope.
Why It’s a Buy: Despite its size, Alphabet’s diverse portfolio and AI-driven growth make it a compelling pick. Its valuation remains attractive compared to other AI leaders, offering a balance of stability and innovation for investors looking to capitalize on AI without chasing overhyped stocks.
2. Advanced Micro Devices (AMD)
Why It’s Undervalued: AMD is a key player in the AI chip market but often plays second fiddle to Nvidia. A May 2025 report from The Motley Fool highlights AMD as undervalued, noting that recent growth challenges are being addressed and its competitive positioning in AI accelerators is strengthening. Its price-to-earnings ratio remains reasonable compared to peers, making it a value-conscious investor’s dream.
AI Edge: AMD’s data center GPUs, like the Instinct MI300 series, are gaining traction for AI workloads, competing directly with Nvidia’s offerings. Partnerships with major cloud providers and a focus on open-source software ecosystems give AMD an edge in accessibility and scalability. Its diversification into PCs and gaming also cushions market volatility.
Why It’s a Buy: AMD’s strategic moves in the AI chip space, paired with its modest valuation, make it a strong contender for investors seeking AI hardware exposure without the premium price tag of competitors.
3. Taiwan Semiconductor Manufacturing Company (TSMC)
Why It’s Undervalued: TSMC, the world’s largest dedicated contract chip manufacturer, is a linchpin in the AI ecosystem, producing chips for companies like Nvidia, AMD, and Apple. Morningstar’s July 2025 analysis suggests TSMC is 13% undervalued relative to a fair value estimate of $262 per share. Its critical role in AI chip production hasn’t fully translated into market hype, keeping its valuation grounded.
AI Edge: TSMC’s advanced manufacturing processes (3nm and 2nm nodes) are essential for producing high-performance chips that power AI applications. With a mid-60s market share in the foundry space, TSMC benefits from the global shift to fabless chip design. Demand from AI-driven sectors is expected to fuel TSMC’s growth for years, as outlined in its investor updates.
Why It’s a Buy: TSMC’s indispensable role in the AI supply chain, coupled with its undervalued stock price, makes it a solid long-term investment. Its ability to navigate cyclical semiconductor markets while maintaining profitability adds to its appeal.
4. Digital Realty Trust (DLR)
Why It’s Undervalued: Digital Realty Trust, a leading data center real estate investment trust (REIT), is riding the wave of booming demand for AI and cloud computing infrastructure. A July 2025 analysis from Simply Wall St estimates DLR is 8.3% undervalued relative to its fair value of $186.40 per share. Despite its critical role in supporting AI workloads, it remains underappreciated compared to flashier AI stocks.
AI Edge: Digital Realty operates 308 data centers globally, providing colocation and interconnection solutions for hyperscale cloud providers like Microsoft, Google, and Amazon, which are driving AI adoption. Its focus on sustainability, including green data centers and renewable energy, enhances cost efficiency and market position. Record bookings in Q2 2025, driven by AI and cloud demand, signal strong growth potential, as noted in Digital Realty’s investor reports.
Why It’s a Buy: With robust demand for data center capacity and projected funds from operations (FFO) growth of 5% in 2025, accelerating to 10% by 2027, Digital Realty is well-positioned to benefit from the AI infrastructure boom. Its stable dividend yield of 2.83% adds appeal for income-focused investors.
Why These Stocks Stand Out
The AI sector is notorious for inflated valuations, but Alphabet, AMD, TSMC, and Digital Realty offer a rare combination of strong fundamentals and reasonable pricing. Alphabet brings diversified AI exposure, AMD provides a competitive alternative in AI chips, TSMC is the backbone of the industry’s hardware needs, and Digital Realty supports the critical infrastructure powering AI and cloud computing. These picks align with the ethos of PositiveStocks and Trader’s Alley, which emphasize uncovering hidden value and capitalizing on market inefficiencies.
A Word of Caution
While these stocks appear undervalued based on recent analyses, investing carries risks. Market conditions, technological disruptions, and macroeconomic factors can impact performance. Always conduct your own research and consider consulting a financial advisor before making investment decisions.
Final Thoughts
The AI revolution is far from over, and undervalued stocks like Alphabet, AMD, TSMC, and Digital Realty offer a chance to get in on the ground floor of long-term growth. By focusing on companies with strong AI exposure and reasonable valuations, investors can position themselves for potential outsized returns. Keep an eye on these names—they might just be the sleeping giants of the AI market.
Disclaimer: This blog post is for informational purposes only and does not constitute financial advice. Always perform your own due diligence before investing.
