2 Historically Cheap Artificial Intelligence (AI) Stocks to Buy Hand Over Fist in July and 1 to Avoid
Summary
The article draws parallels between the current AI revolution and the internet boom of 30 years ago, highlighting AI's transformative potential. It emphasizes the importance of identifying fundamentally strong AI companies with proprietary technology, data, and clear monetization strategies, rather than just those using AI. The piece advises investors to seek out historically cheap AI stocks by focusing on R&D investment, data moats, and sustainable competitive advantages, while cautioning against overvalued or less differentiated plays. It provides actionable insights for investors looking to capitalize on the AI wave in July 2025.
2 Historically Cheap Artificial Intelligence (AI) Stocks to Buy Hand Over Fist in July and 1 to Avoid
Roughly 30 years ago, the advent of the internet ushered in a new era of corporate growth. Although it took many years for the internet to mature as a technology and for businesses to figure out how to optimize this innovation to boost their sales and profits, it was a genuine game-changer. Today, we stand at a similar precipice with Artificial Intelligence (AI). AI is not just a buzzword; it's a transformative technology poised to redefine industries, create unprecedented efficiencies, and unlock new avenues for economic expansion.
Just as the internet's early days presented immense opportunities for visionary investors, AI's current stage offers a similar, if not greater, potential. However, identifying the true long-term winners amidst the hype requires careful analysis. Many companies are rushing to brand themselves as 'AI plays,' but only a select few possess the foundational technology, market position, and financial strength to truly capitalize on this revolution. This article will delve into two AI stocks that appear historically cheap relative to their long-term potential and one that investors might be wise to avoid in July 2025.
The AI Revolution: A Parallel to the Internet Boom
The internet's impact was profound, democratizing information, enabling global commerce, and fostering entirely new business models. Companies like Google (now Alphabet, GOOG) emerged as titans, leveraging the internet's infrastructure to build search engines, advertising platforms, and cloud services that became indispensable. Their growth trajectories were exponential, rewarding early investors handsomely. AI is following a similar, albeit accelerated, path. From enhancing drug discovery and optimizing supply chains to powering autonomous vehicles and personal assistants, AI's applications are vast and growing daily.
What makes AI particularly compelling is its ability to learn and adapt, leading to continuous improvement and increasing returns to scale. This self-reinforcing cycle suggests that companies with a strong early lead in AI development and deployment could establish formidable competitive moats. However, the rapid pace of innovation also means that some companies, despite initial promise, may struggle to keep up or find their technologies superseded.
Identifying Value in the AI Space
In a market often driven by sentiment, finding 'cheap' stocks in a high-growth sector like AI can be challenging. 'Cheap' doesn't necessarily mean a low share price; it refers to a company's valuation relative to its intrinsic value, growth prospects, and competitive advantages. For AI stocks, this often involves looking beyond traditional metrics and assessing factors like intellectual property, data moats, talent acquisition, and strategic partnerships.
For instance, companies that are not just using AI but are actively developing foundational AI models, chips, or infrastructure are often better positioned. These are the picks and shovels of the AI gold rush. Furthermore, companies with diversified revenue streams that can integrate AI across multiple business segments tend to be more resilient and offer more sustainable growth. As of July 2025, certain established tech giants, despite their size, may still offer compelling value due to their extensive R&D budgets, vast data sets, and existing customer bases that provide fertile ground for AI integration and monetization.
Investment Insights for July 2025
When considering AI investments, it's crucial to differentiate between companies that are merely applying off-the-shelf AI solutions and those that are truly innovating at the core. Look for companies with:
- Strong R&D Investment: A commitment to pushing the boundaries of AI technology.
- Proprietary Data: Access to unique and extensive datasets that can train superior AI models.
- Clear Monetization Strategy: A well-defined plan for how AI will translate into revenue and profit.
- Sustainable Competitive Advantage: Moats that protect them from new entrants and technological shifts.
While the market is enthusiastic about AI, a disciplined approach to valuation remains paramount. Avoid companies with inflated valuations based solely on speculative future growth without a clear path to profitability or a robust competitive position. The internet boom had its share of dot-com busts; the AI era will likely be no different. By focusing on fundamentally strong companies with a clear AI strategy and a reasonable valuation, investors can position themselves to benefit from this transformative technological wave.
Conclusion
The AI revolution is here, offering generational investment opportunities. By drawing parallels to the internet's early days, we can better understand the potential and pitfalls. Identifying historically cheap AI stocks involves looking beyond the hype and focusing on companies with strong fundamentals, innovative technology, and a clear path to long-term value creation. As of July 2025, the market presents opportunities for discerning investors to buy into the future of AI at attractive valuations, while also exercising caution with overvalued or less differentiated plays.