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Value Meets Growth: 3 Artificial Intelligence (AI) Stocks Even Warren Buffett Might Respect
GOOGAlphabet(GOOG) The Motley Fool·2025-06-08 08:35

Core Viewpoint - The article discusses the potential for value stocks in the AI sector, highlighting companies that may attract value-oriented investors like Warren Buffett, despite their growth characteristics. Group 1: Alphabet - Alphabet is positioned as a potential fit for Berkshire Hathaway due to its leadership in AI and strong cash flow from digital advertising [4] - The company generates 74% of its revenue from ads, facing pressure as its search market share drops below 90%, prompting diversification into Google Cloud and autonomous driving with Waymo [5][6] - Alphabet plans to invest 75billionincapitalexpendituresthisyear,supportedby75 billion in capital expenditures this year, supported by 95 billion in liquidity and 75billioninfreecashflowoverthepast12months,makingitattractiveforvalueinvestorswithaP/Eratioofabout19[6]Group2:MetaPlatforms−MetaPlatforms,knownprimarilyasasocialmediacompany,isinvestingheavilyinAIandthemetaverse,withacapexcommitmentof75 billion in free cash flow over the past 12 months, making it attractive for value investors with a P/E ratio of about 19 [6] Group 2: Meta Platforms - Meta Platforms, known primarily as a social media company, is investing heavily in AI and the metaverse, with a capex commitment of 64 billion to 72billionby2025[7][8]−Thecompanyhasover72 billion by 2025 [7][8] - The company has over 70 billion in liquidity and generated 50billioninthelast12months,allowingittosupportitsambitiousinvestments[8]−WithaP/Eratioaround27,MetapresentsareasonablevaluationalongsideitspotentialforAIleadership,appealingtovalue−orientedinvestors[9]Group3:Qualcomm−Qualcommisidentifiedasasurprisingvaluestock,withdiversificationintoIoT,automotive,anddatacenterprocessorsamidchallengesinthesmartphonemarket[10]−Thecompanyhasspent50 billion in the last 12 months, allowing it to support its ambitious investments [8] - With a P/E ratio around 27, Meta presents a reasonable valuation alongside its potential for AI leadership, appealing to value-oriented investors [9] Group 3: Qualcomm - Qualcomm is identified as a surprising value stock, with diversification into IoT, automotive, and data center processors amid challenges in the smartphone market [10] - The company has spent 1.1 billion in capex over the past year, but the emergence of low-cost AI could revitalize its smartphone segment, which has a 12% annual revenue growth rate [11] - Qualcomm's IoT and automotive segments have shown impressive growth rates of 27% and 59% respectively, and it trades at a P/E ratio of 15, making it an attractive investment opportunity [12]