2 Historically Cheap Artificial Intelligence (AI) Stocks to Buy Hand Over Fist in July and 1 to Avoid

Core Insights - The evolution of artificial intelligence (AI) is seen as the next significant technological leap, similar to the internet's impact on corporate growth [2][4] - AI is projected to add $15.7 trillion to the global economy by 2030, creating numerous investment opportunities [4] Group 1: Investment Opportunities - Alphabet (Google's parent company) is identified as a strong buy due to its historically low valuation and dominant market share in internet search, holding 89.6% as of May 2025 [5][6] - Alphabet's revenue is heavily reliant on advertising, which constitutes approximately 74% of its net sales, positioning it well for economic growth [7][8] - Google Cloud is highlighted as a key growth driver, with an annual run-rate revenue exceeding $49 billion, benefiting from generative AI solutions [9] - Alphabet's shares are trading at a forward price-to-earnings (P/E) ratio of 17.5, representing a 28% discount to its five-year average [10] - Okta, a cybersecurity company, is also recommended as a buy, with a forward P/E ratio of 27 and a subscription-based model that offers high margins [12][16] - The demand for cybersecurity solutions is expected to grow, driven by the increasing necessity for businesses to protect sensitive data [13] Group 2: Investment Risks - Palantir Technologies is flagged as a stock to avoid due to its excessively high price-to-sales (P/S) ratio, which recently surpassed 110, indicating overvaluation [17][19] - Despite having a sustainable business model with predictable cash flow, Palantir's valuation is considered unsustainable compared to historical norms for innovative companies [18][19] - The narrow customer base for Palantir's most profitable segment, Gotham, limits its long-term growth potential, as it primarily serves the U.S. and its allies [22]