AI Stocks: Alphabet & Adobe

Artificial intelligence (AI) stocks are often considered expensive, but there are still some that could be good investments. Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) and Adobe (NASDAQ: ADBE) are two examples of stocks that may be worth buying now.

These stocks are considered cheap because they are less expensive than the S&P 500(SNPINDEX: ^GSPC), which has a forward price-to-earnings (P/E) ratio of 22.1. Also, both stocks are growing earnings per share (EPS) faster than the market. It is projected that both companies will exceed the S&P 500's usual 10% growth rate over the next two years.

EPS Growth Projections:

Alphabet:

2025: 19%
2026: 6%

Adobe:

2025: 11%
2026: 12%

These projections may not account for the companies' stock buyback plans, which could further boost EPS.

The market may be undervaluing these stocks because of the potential for AI to disrupt their primary businesses. Google Search, Alphabet's main business, could be replaced by AI. Similarly, Adobe's graphic design products could become obsolete due to AI image generation.

However, Google has introduced AI search options, and Adobe has launched Firefly AI. These tools may help the companies maintain their leadership positions. Additionally, Google Search revenue increased by 10% in the previous quarter, and Adobe's software offers a level of control that generative AI tools may not. Despite potential challenges, these businesses are performing well, making their stocks attractive buys.

The Motley Fool Stock Advisor analyst team identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keithen Drury has positions in Adobe and Alphabet. The Motley Fool has positions in and recommends Adobe and Alphabet. The Motley Fool has a disclosure policy.