2 Artificial Intelligence (AI) Stocks That Could Soar in the Second Half of 2025

Despite the S&P 500's 5% gain in H1 2025, growth stocks like SentinelOne and Alphabet have underperformed but are positioned for a potential H2 rebound. SentinelOne, an AI cybersecurity firm, reported decelerating revenue growth and a lowered FY26 forecast due to macroeconomic factors, yet its stock is down 20% YTD and trades at a compelling 6.6x price-to-sales, suggesting undervaluation. Alphabet, while navigating antitrust challenges and AI chatbot competition to its core search business, is aggressively integrating AI through Gemini and AI Overviews, with its Google Cloud segment demonstrating strong growth. Its current 19.8x price-to-earnings makes it the most attractively valued among the 'Magnificent Seven,' positioning both firms for a potential recovery driven by their AI advancements and current valuations.

Analysis

Despite a 5% gain for the S&P 500 in H1 2025, growth-oriented technology stocks SentinelOne and Alphabet have underperformed, presenting a potential rebound scenario for H2. SentinelOne (S), an AI-powered cybersecurity firm, has seen its stock decline 20% year-to-date. This follows fiscal Q1 results showing a revenue growth deceleration to 23% YoY, down from 29% in the prior quarter, and a 1% reduction in its full-year revenue forecast to approximately $998.5 million due to macroeconomic uncertainties. However, the company's valuation appears compelling at a price-to-sales ratio of 6.6, noted as significantly cheaper than AI cybersecurity peers, suggesting the market may have overly penalized the stock for the revised outlook. Alphabet (GOOGL) faces distinct headwinds from an adverse DOJ antitrust verdict, which has contributed to its valuation discount. The company trades at a price-to-earnings ratio of 19.8, the lowest among the 'Magnificent Seven'. While its core search business is adapting to AI disruption with initiatives like AI Overviews, the key growth engine is Google Cloud, which posted robust 28% YoY revenue growth in Q1 2025. This strong performance in its cloud and AI segments, combined with its discounted valuation, suggests that the market may be underappreciating its long-term AI-driven growth potential relative to the legal overhang.

Key Decisions for Investors

• Consider SentinelOne as a potential value play in the cybersecurity sector, given its stock is down 20% year-to-date and trades at a significant valuation discount (6.6x P/S) to peers, while remaining aware of the risks from decelerating revenue growth and recently lowered guidance.
• Evaluate Alphabet for its attractive valuation at a 19.8 P/E ratio, the lowest of the 'Magnificent Seven', and the strong 28% growth momentum in its AI-centric Google Cloud division, which could offset concerns surrounding the ongoing DOJ antitrust litigation.
• Monitor for opportunities in quality growth stocks that have underperformed the broader market, as their strong AI-driven fundamentals could catalyze a rebound if specific headwinds like macroeconomic uncertainty or legal challenges show signs of easing.