2 Dirt Cheap AI Stocks to Buy in June

Core Viewpoint - The article highlights that despite the general perception of AI stocks being expensive, there are still undervalued stocks in the AI sector, specifically Alphabet and Adobe, which present strong buying opportunities at current prices [1]. Group 1: Stock Valuation - Both Alphabet and Adobe are considered "dirt cheap" as they are trading below the S&P 500's forward price-to-earnings (P/E) ratio of 22.1 [3]. - These stocks have rarely been this cheap historically, indicating a potential buying opportunity for investors [5]. Group 2: Earnings Growth Potential - Both companies are projected to achieve earnings per share (EPS) growth that exceeds the typical 10% growth rate of the S&P 500 over the next two years, with Alphabet expected to grow EPS by 19% in 2025 and 6% in 2026, while Adobe is projected to grow by 11% in 2025 and 12% in 2026 [6][7]. - The article suggests that analyst projections may underestimate growth due to significant stock buyback plans from both companies, which could enhance EPS by reducing the share count [7]. Group 3: Market Perception and Risks - The market perceives both companies as vulnerable to disruption from AI trends, particularly Alphabet's Google Search and Adobe's graphic design software [8][9]. - Despite concerns about generative AI potentially making Adobe's software obsolete, the company has introduced Firefly AI, which enhances user capabilities and maintains creative control, suggesting that Adobe's products remain relevant [10]. - Both companies are expected to face occasional challenges from generative AI, but their solid business fundamentals and low stock prices indicate strong potential for long-term returns [11].