Two Cheap AI Stocks That Could Drive the Next Market Rally

The current bull market has already entered its fourth year, and with the S&P 500 posting impressive double-digit annual returns, the momentum shows no signs of stopping. Historically, bull markets that advance this far tend to maintain their strength. However, savvy investors understand that real wealth is built by identifying undervalued assets that will outperform across multiple market cycles. In this environment, cheap AI stocks—particularly those backed by established tech giants—may offer exceptional value. The artificial intelligence market alone is projected to explode from its current $300 billion size to several trillion dollars within the next decade, and two massive technology companies still trade at bargain-basement valuations despite massive AI investments. Let’s explore why these names could be your ticket to outsized returns.

Meta Platforms: A Social Media Giant Reaping AI Rewards at Attractive Prices

Meta Platforms (NASDAQ: META) stands as one of the most affordably valued stocks within the Magnificent Seven, the group of mega-cap tech stocks that have powered the broader market higher in recent years. With shares trading at just 26x forward earnings—down from 30x a few months prior—the market appears to be pricing in far less upside than the company’s AI strategy suggests is possible.

What makes Meta’s valuation particularly compelling? The company has made AI central to its corporate strategy, developing its own large language model called Llama and deploying it to transform its most profitable business segment: digital advertising. Since Meta controls Facebook, Instagram, and other massive social platforms where billions of people congregate daily, advertisers are already primed to increase spending. When AI-driven tools help these advertisers see measurably better campaign results, they tend to boost their budgets significantly—a dynamic that should accelerate Meta’s revenue growth in the coming years.

Beyond revenue expansion, Meta possesses the financial firepower to invest aggressively in AI infrastructure while simultaneously returning capital to shareholders through dividends. The company’s track record on invested capital returns demonstrates a proven ability to convert major technology bets into shareholder value. All of this suggests that the market may be underestimating Meta’s AI upside, making it a cheap AI stock positioned to lead future market advances.

Alphabet: Search Giant Leveraging AI Across Multiple Revenue Engines

Alphabet (NASDAQ: GOOG, GOOGL) shares several characteristics with Meta, yet remains equally overlooked by the broader market. Like Meta, Alphabet operates a highly profitable, deeply entrenched business—in this case, the world’s dominant search engine, Google Search. The company’s position in search has enabled it to generate billions in annual earnings while building two distinct revenue streams: search advertising and cloud computing services.

Alphabet’s recent milestone—its first $100 billion quarter—underscores the scale of its core advertising business. Yet the company’s growth opportunity extends well beyond search. Google Cloud has emerged as a serious challenger in cloud computing, offering enterprise customers a comprehensive suite of AI-enabled services and tools. Like Meta, Alphabet has developed its own advanced large language model, Gemini, which the company uses internally while also licensing to external customers as a key differentiator in the competitive cloud market.

Despite commanding massive revenues and substantial market share in two major sectors, Alphabet’s stock price has not fully reflected these advantages. Trading at just 29x forward earnings, Alphabet ranks among the cheapest AI stocks relative to its growth prospects. As the broader AI market expands over the coming years, the company is well-positioned to capture disproportionate value, potentially making it a primary driver of the next bull market’s gains.

Why Valuation Matters for Your Portfolio

Both Meta and Alphabet demonstrate a critical investment principle: sometimes the best opportunities come from overlooked valuations rather than cutting-edge narratives. While AI stocks have rallied significantly, these two technology titans have lagged relative to their long-term potential. Their valuations—26x and 29x forward earnings respectively—offer a rare window to gain exposure to AI through companies with proven business models, massive scale, and unmatched competitive advantages.

The combination of cheap valuations, exposure to a multi-trillion-dollar market opportunity, and operational excellence across core businesses creates a compelling risk-reward scenario. Historical precedent suggests that cheap AI stocks backed by financially powerful incumbents often generate the most substantial returns during extended bull markets. For investors willing to think strategically about the next three to five years, these two undervalued names deserve serious consideration.