2 Bargain Artificial Intelligence (AI) Stocks to Buy Now Down Around 25% From Their All-Time Highs

Meta Platforms is down more than 25% from its peak despite Q1 revenue rising 33% year over year, while Microsoft is also off slightly more than 25% but posted 123% AI business growth and 40% Azure growth. The article argues both stocks look cheap relative to the S&P 500, trading at 18x forward earnings for Meta and 21.3x expected fiscal 2027 earnings for Microsoft. The main concern is Meta's $135 billion capital expenditure midpoint, which is weighing on sentiment around AI returns.

Analysis

The market is treating both names like AI-capex stories, but the real distinction is balance-sheet elasticity and monetization visibility. META is effectively being punished for making a large, front-loaded bet where the payback is harder to underwrite; that creates an opportunity for investors willing to look through 2-4 quarters of margin noise, but it also means the stock can stay cheap until the spend rate visibly decelerates or revenue per compute dollar inflects.

MSFT has the cleaner second-order setup. Unlike a pure AI beneficiary, it can fund AI investment with a diversified cash engine, so the risk is less existential and more about multiple compression if growth normalizes faster than investors expected. The more interesting angle is that Azure and AI monetization strengthen enterprise lock-in, which should pressure smaller cloud and software vendors with weaker bundles and less pricing power over the next 6-12 months.

The consensus may be underappreciating how different the catalyst path is for each stock. META likely needs a proof point on capex efficiency before re-rating; MSFT can re-rate simply by sustaining current growth while keeping AI spend disciplined, making it the lower-volatility way to express the same thematic exposure. On a relative basis, the market is still paying too much attention to near-term capex headlines and too little to the fact that both firms are converting AI into distribution advantage rather than just incremental product features.

Key Decisions for Investors

• Long MSFT vs. short a basket of smaller-cap enterprise software names over 3-6 months: best way to express AI monetization quality versus expensive, less-proven competitors; target low-to-mid teens relative outperformance if Azure/AI growth persists.
• Buy META on weakness only if it trades at a further 10-15% discount from here: asymmetric setup improves if investors get another quarter of strong ad growth without an immediate step-up in capex guidance; risk is a prolonged de-rating if ROIC remains opaque.
• Initiate a pair trade: long MSFT / short META for 1-2 quarters if the market continues to punish capex intensity more than monetization quality; this favors the lower-drawdown profile while keeping AI exposure.
• For options, consider MSFT call spreads 6-9 months out rather than outright shares: captures re-rating potential while limiting premium paid if valuation stays anchored around current forward multiples.