2 AI Stocks That Are Worth Buying the Dip

The excitement surrounding artificial intelligence (AI) took over the market in 2023 and 2024. For a time, it seemed that AI stocks were unstoppable. However, the sentiment has changed in 2025 as these stocks have faced significant declines, with companies like Tesla and Palantir Technologies experiencing drops of over 30% from their peak values.

Concerns are growing about slowing spending for these AI firms, exacerbated by broader market weaknesses due to fears of a recession and the impact of the Trump administration's tariffs.

This decline in AI stock prices has opened up potential buying opportunities for long-term investors. Here are two AI stocks to consider buying during this dip.

Alphabet: Leading the Innovation Charge

Alphabet (GOOG 1.75%) (GOOGL 1.68%) has a reputation on Wall Street that swings between extreme optimism and pessimism. At times, it is celebrated as the most innovative AI company globally, while at other times, it faces skepticism regarding competition from newcomers like OpenAI.

As 2025 begins, skepticism has the upper hand, creating a buying opportunity for this strong business. Alphabet's revenue surged 15% year-over-year in 2024, reaching $350 billion, while its operating income grew by an impressive 33% to $112.4 billion. If competition is impacting Alphabet, it's not reflected in their financial performance.

The company is advancing quickly across its many tech segments. It is integrating AI tools into Google Search, expanding its Google Cloud services, and growing its Waymo robotaxi service in major cities across the U.S.

This is just the beginning; at Google Deepmind, researchers are making significant strides in AI, including embedding language models into humanoid robots and exploring quantum computing. If Alphabet is indeed losing ground in AI, the evidence has yet to appear.

With its stock down 20% from its highest value, Alphabet now holds a price-to-earnings ratio (P/E) of 20, significantly lower than the S&P 500 average of 28. While there are immediate competitive and macroeconomic challenges due to tariffs, this moment seems ideal for investors to buy and hold Alphabet shares.

Applied Materials: Foundation for AI Innovations

In contrast to Alphabet, which is familiar to almost everyone, Applied Materials (AMAT 3.81%) operates behind the scenes. This company creates and sells machinery for semiconductor manufacturing—an essential aspect of AI development. Without advanced chips, the sophisticated AI tools that companies like Alphabet rely on would fail to function effectively.

Applied Materials, along with other firms in the semiconductor equipment space, plays a crucial role in helping manufacturers shape, process, and analyze minuscule transistors in semiconductors. Their technology enables the creation of transistors that are just 3 nanometers apart, making them indispensable to the AI supply chain.

The company has thrived as the semiconductor market has expanded over the past few decades, and analysts predict that this growth will continue to outstrip global GDP, fueled by rising AI spending. Over the past decade, Applied Materials has grown its sales by nearly 200%.

The management has also been proactive with a steady share buyback program, reducing the number of outstanding shares by 34% within the last ten years. The board has recently authorized an additional $10 billion for stock buybacks and approved a 15% dividend increase.

With its P/E ratio now below 20, Applied Materials appears to be a reasonably priced growth stock that also offers an attractive return of capital, making it an excellent candidate for long-term investment.

Note: The information provided in this article is for educational purposes only and should not be considered as financial advice. Always conduct your research before investing.

AI, Stocks, Investing