NVIDIA (NASDAQ:NVDA) is probably the first thing that springs to mind when you think about AI stocks. The company has seen explosive growth and sky-high valuations to match. However, not all AI stocks today come with a jaw-dropping price tag.

NVDA itself has declined to a reasonable premium. Plenty of AI companies are flying under the radar right now and are overlooked by a market that’s still obsessed with the biggest winners of the past two years.

The underdogs might not have the flashiest businesses, but they’re now sitting at record lows after the latest AI selloff shook things up. I’d argue they’ve got the potential to outshine even NVIDIA in the coming years. The downside risk is lower, and there’s significant upside potential compared to the overstretched giants.

ACM Research (ACMR)
ACM Research (NASDAQ:ACMR) is one of the cheapest AI semiconductor stocks you can buy. The stock trades at a forward price-earnings ratio of just 11 times. This gem trades at a jaw-dropping discount when you stack it up against its subsidiary, ACM Research Shanghai. The subsidiary has a valuation of about $6 billion, whereas the parent company on the Nasdaq currently has a valuation of $1.55 billion.

Kerrisdale Capital is a short seller that did a positive report on this company a while back and ACMR stock has rallied significantly since then. It is up 58% year-to-date. China’s not slowing down its semiconductor ambitions, tariffs or not. Beijing’s dumping billions into AI and chipmaking and ACMR’s wafer-cleaning tech is a linchpin for that push. This company is locked in with top-tier fabs like SMIC and YMTC.

Kerrisdale predicts a $10 billion market cap down the road, and I’m on board with that optimism. Revenue’s grown 10x in six years, and with China’s self-sufficiency drive accelerating (Bernstein sees domestic WFE share hitting 36% by 2026), ACMR’s growth could kick into overdrive. ACMR’s supply chain is mostly non-U.S.-reliant now. Plus, its tools skew toward trailing-edge nodes, where China’s already strong. Add in early wins at Intel and SK Hynix, and you’ve got global upside that’s barely priced in.

Intel (INTC)

Intel (NASDAQ:INTC) isn’t as undervalued as ACMR, nor does it have a clear bullish narrative, but I think it’s worth betting on with new leadership. There’s solid turnaround potential with a new CEO and proposals of splitting up the company.

Intel posted a $19 billion loss for all of 2024, which was its first annual loss since 1986. It has also been outpaced by NVIDIA in AI chips and Taiwan Semiconductor (NYSE:TSM) in manufacturing. It has barely held onto its CPU market share against AMD (NASDAQ:AMD), but even that is shaky.

Righting the ship will likely take many years, but if Tan can pull it off, there’s likely triple-digit upside potential here. Tan has a solid track record from his time at Cadence Design Systems (NASDAQ:CDNS) and has industry-wide connections.

He’s focusing on the foundry segment and wants to make it a real competitor to TSMC by landing big clients like NVIDIA and Broadcom (NASDAQ:AVGO). He’s also pushing the 18A manufacturing process for next-gen AI chips like Panther Lake, which could finally give Intel a foothold in the AI race. If he pulls this off and Intel starts regaining market share, the stock could soar from its current levels.

Intel could also be acquired by Broadcom and TSMC. If either deal happens, shareholders could see a nice payout. The Trump administration has reportedly pushed for TSMC to help prop up Intel’s foundry operations. The risk-reward ratio seems quite good, considering how far INTC has declined already.

— Omor Ibne Ehsan

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Source: Money Morning