Artificial intelligence (AI) was a huge theme in the market during 2024, with several stocks becoming big winners from the emerging technology. AI technology still appears to be very much in its early days and there is mounting evidence that AI will continue to be a powerful growth driver in the years ahead. This largely stems from large tech companies, as well as well-funded start-ups such as OpenAI and Elon Musk-backed xAI, continuing to ramp up spending, looking to take advantage of what they see as a generational opportunity.
Against this backdrop, let’s look at three AI stocks across infrastructure, cloud computing, and software that all currently trade at attractive valuations. If you have $3,000 available to invest that isn’t needed for monthly bills, paying off short-term debt, or bolstering an emergency fund, you might want to consider buying and holding one (or all) of these stocks for the long term.
1. Nvidia
When looking at AI-related stocks to buy, the first name to consider remains Nvidia (NVDA 3.48%). The stock has been a huge winner over the past several years. Despite that, it still trades at an attractive valuation with a forward price-to-earnings (P/E) ratio of about 31 based on 2025 analyst estimates, and a price/earnings-to-growth (PEG) ratio of approximately 0.98. A PEG ratio less than 1 is typically viewed as undervalued, but growth stocks tend to command PEG ratios well above 1.
NVDA PE Ratio (Forward 1y) data by YCharts
Nvidia developed a wide moat through its CUDA software that helped it obtain approximately 90% market share in the graphic processing unit (GPU) market. With competition and valuation not much of a concern, the biggest question surrounding Nvidia is whether AI infrastructure spending will continue at its rapid pace.
Large language models (LLMs) need more and more GPUs to train on as they advance, so the question becomes: Is there a point where these models become good enough for the companies creating them to pull back on their spending? To believe they will, one must think that the likes of Microsoft, Amazon, Alphabet (GOOGL 1.77%) (GOOG 1.77%), Meta Platforms, and xAI, among others, will be satisfied not having the best AI model out there.
If you don’t think they will be satisfied, Nvidia is a buy.
Image source: Getty Images.
2. Alphabet
In part due to some uncertainty following a government antitrust ruling, Alphabet became the cheapest of the big tech companies that have been driving AI infrastructure spending, trading at a forward P/E of only 19 times next year’s analyst estimates.
GOOG PE Ratio (Forward 1y) data by YCharts
Nonetheless, Alphabet is showing signs of being a big AI winner. Not only is its cloud computing unit growing its revenue rapidly, but the high-fixed-cost business also hit a profitability inflection point. Last quarter, Google Cloud was the fastest growing of the three big cloud providers, with the segment’s revenue jumping 35% year over year to $11.4 billion and the segment’s operating income surging from $266 million a year ago to $1.95 billion. Alphabet is at the forefront of customized application-specific integrated circuits (ASICs) for AI, and it credits the combination of its customized tensor processing units (TPUs) with GPUs in helping reduce inference processing times and lower costs. It also said customers are attracted to AI large language model Gemini’s strong multimodal capabilities.
Meanwhile, the company is using AI to help better understand its users and connect them with advertisers. Its use of AI overviews also opens up additional monetization opportunities with different ad formats. The company traditionally has only served ads to about 20% of its searches, so this represents a great opportunity.
Overall, Alphabet is well positioned to benefit from AI, and I think the company could be worth more if it were broken up, as the values of Google Cloud; its self-driving unit, Waymo; and YouTube would likely command higher multiples as stand-alone entities given their strong positions in their respective markets.
3. Workday
Trading at a forward price-to-sales (P/S) ratio of 7.2 and a forward P/E ratio of under 31 based on analysts’ fiscal 2026 estimates, Workday (WDAY 4.59%) is an attractively valued software-as-a-service (SaaS) stock just starting to ride the AI wave.
WDAY PS Ratio (Forward 1y) data by YCharts
The company has been turning to AI to help drive growth, saying last quarter that 30% of its customer expansions in the quarter came from adopting AI solutions. It noted that products such as Recruiter Agent and Talent Optimization were seeing strong traction. Meanwhile, management says the company’s upcoming Optimize Agent solution could be a “game changer,” as it is able to identify bottlenecks and inefficiencies.
Workday is also looking to aggressively pursue the federal government vertical, where it sees an opportunity to replace older inefficient systems that are pricey to maintain. With a new administration coming in with a stated focus on cost reductions and efficiency, this should be a nice opportunity.
Workday is looking to grow revenue by a mid-teens percentage while expanding its operating margin. If achieved, it should be a nice combination that helps its stock move higher over the long term.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Workday. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
