Two AI Stocks to Watch in August

Published Date : 01/08/2025 

Micron Technology and Alphabet are two undervalued stocks that are playing crucial roles in the AI revolution, making them attractive buys in August. 

Many artificial intelligence (AI) specialists have seen their stocks skyrocket in the last couple of years. However, some of the best names in the AI boom have been left behind. In particular, memory chip maker Micron Technology (NASDAQ: MU) and online services giant Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) look like fantastic buys right now. Their modest stock valuations don't reflect their massive growth opportunities.

So if you're looking for an AI stock to buy in August, you should give Google's parent company and Micron another look. Here’s why these stocks are worth considering.

The memory chip market is notoriously cyclical. The handful of leading chip suppliers never seem to be ready when another tech trend results in massive demand for digital memory. This can be seen with the rise of smartphones, AI, and increasingly computerized cars. Then they build out their manufacturing facilities until the demand driver fades out or the new supply simply grows too large. This leads to a drop in unit prices, a mini-recession in the memory industry, and investors waiting for the next surge in demand.

You can see these cycles on Micron’s stock chart, with a semi-predictable roller coaster ride with peaks and valleys. Importantly, each new top tends to be much higher than the last one. From that perspective, the AI-driven memory boom has been going on for about two years now. Some of the industry's cycles have seen two-year upswings followed by similar-sized downswings. And Micron's stock has gained 61% in the past two years, which might suggest a correction is due.

Some market makers sure seem to feel that way. Micron’s stock trades at just 9.2 times forward earnings estimates today. Its price-to-earnings-to-growth (PEG) ratio is a minuscule 0.2. For context, a PEG ratio around 1.0 indicates a fair valuation in terms of proven profits and upcoming growth. Values in Micron's range suggest that investors aren’t convinced by optimistic growth targets or are worried about the company’s financial future.

But Micron's sales rose by 58% in the past two years, while trailing free cash flows swung from a $4.7 billion negative reading to $1.9 billion of positive cash profits. Micron is the preferred memory provider for Nvidia's (NASDAQ: NVDA) latest and greatest AI accelerators. Modern smartphones ship with lots of extra memory in order to handle their built-in AI functions. In short, the growth catalysts just keep coming.

Alphabet, on the other hand, runs a diverse set of businesses like YouTube, Waymo, Android, and Google Cloud, giving it many paths to future growth. The company’s deep involvement in AI research and development positions it well to capitalize on the ongoing AI revolution. Google Cloud, in particular, is a key player in the cloud computing market, which is expected to grow significantly in the coming years.

Alphabet's stock also appears undervalued when compared to its AI peers. Despite its broad portfolio of high-growth businesses, the stock trades at a reasonable multiple, making it an attractive buy for investors looking to capitalize on the AI boom.

In summary, both Micron Technology and Alphabet offer compelling investment opportunities in the AI sector. Their current valuations don’t fully reflect their potential for future growth, making them worth considering for your portfolio in August. 

Frequently Asked Questions (FAQS): 

Q: What is the current PEG ratio of Micron Technology?

A: Micron Technology's current PEG ratio is 0.2, which is significantly lower than the typical fair valuation of 1.0.

Q: How has Micron Technology's revenue changed over the past two years?

A: Micron Technology's sales have increased by 58% over the past two years.

Q: What are some of the key businesses run by Alphabet?

A: Alphabet runs businesses like YouTube, Waymo, Android, and Google Cloud, among others.

Q: Why is Micron Technology considered a good buy for AI investors?

A: Micron Technology is the preferred memory provider for Nvidia's AI accelerators and is well-positioned to benefit from the growing demand for digital memory in smartphones and AI applications.

Q: How does Alphabet's involvement in AI research and development position it for future growth?

A: Alphabet's deep involvement in AI research and development, particularly through Google Cloud, positions it well to capitalize on the ongoing AI revolution and the expected growth in the cloud computing market. 

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