Undervalued Tech Stocks: AI-Powered Growth Opportunities

Are There Still Bargains in Tech?

Even with markets approaching record highs, compelling deals can still be found, especially in the tech sector. Some tech stocks are trading at attractive valuations while possessing significant long-term growth prospects. Let's examine three such companies:

1. Taiwan Semiconductor Manufacturing (TSMC)

Despite a roughly 35% year-to-date increase, Taiwan Semiconductor Manufacturing (TSM) remains attractively valued, boasting a forward price-to-earnings (P/E) ratio under 24 times the 2026 analyst earnings estimates. This presents a bargain for a company widely considered the most vital player in the semiconductor industry. The current AI infrastructure boom simply wouldn't exist without TSMC's technological expertise and scale. TSMC manufactures nearly all the world's most advanced chips, as competitors have struggled to consistently match its ability to produce chips at smaller nodes with high yields. To enable advancements in chip technology, manufacturers must consistently shrink node sizes – the number of transistors that can fit on a chip. This shrinking process enables more powerful and energy-efficient advanced chips, such as graphics processing units (GPUs).

TSMC is the only foundry consistently able to shrink nodes while maintaining high yields. This makes it the go-to partner for leading chip designers and a critical component of the semiconductor value chain. It also grants TSMC substantial pricing power and a long runway for growth. Management anticipates AI chip demand to grow at a compound annual growth rate (CAGR) exceeding 40% through 2028.

Combining its growth prospects and attractive valuation, TSMC appears to be a smart way to participate in the AI revolution. (Note: This is not investment advice. Conduct thorough research before making any investment decisions.)

2. Alphabet (Google)

Despite a strong performance this year, Alphabet (GOOGL) remains undervalued at around 24 times 2026 earnings estimates. This represents a discount compared to many of its mega-cap peers, especially considering Alphabet's diversified and durable business model. While concerns persist that AI could erode Google Search's dominance, search revenue growth has actually accelerated, driven by new AI features like AI Overviews and Circle to Search. These tools boost user engagement and further monetize search queries.

The recent Department of Justice decision also eliminated a significant uncertainty, allowing Alphabet to maintain its search deal with Apple and retain control of Chrome and Android. This secures its substantial distribution advantage. Chrome continues to dominate the browser market, and Android powers nearly three-quarters of all smartphones, ensuring most users default to accessing the internet through Google.

Furthermore, Alphabet boasts one of the fastest-growing cloud computing platforms. Google Cloud revenue surged 32% last quarter, with profits more than doubling. Cloud demand remains robust as businesses race to develop AI tools and models on cloud infrastructure. While this trend benefits the entire sector, Alphabet benefits significantly through its custom AI chips and Gemini models, which enhance both performance and cost-efficiency. From search and cloud to emerging ventures like Waymo's robotaxi business, Alphabet has multiple avenues for sustained growth, an upside not fully reflected in the current stock valuation.

3. Pinterest

Pinterest (PINS) represents another attractively priced tech stock benefiting from AI advancements. Trading at under 16 times 2026 earnings, Pinterest offers a compelling valuation for a company generating mid-teens revenue growth and expanding operating margins. Under CEO Bill Ready, the photo-sharing site has undergone a transformation, becoming more shoppable and appealing to advertisers.

Pinterest has developed its own multimodal AI model to power visual search and personalize recommendations. This enhances the user experience and simplifies finding desired products. Advertisers are also experiencing improved results through automation tools like Performance+, which streamline campaign creation, targeting, and bidding.

This has contributed to Pinterest's Average Revenue Per User (ARPU) growth, an area where it historically lagged. A partnership with Alphabet is further enabling better monetization of emerging market users. Last quarter, international ARPU grew by 26% in Europe and 44% in the rest of the world, though Pinterest still has considerable ground to cover to catch up with its peers. The platform is also attracting new users, with monthly active users growing 11% to 578 million, fueled by growth in emerging markets.

The company has partnered with Amazon and recently with Instacart, further simplifying shopping directly from the Pinterest site. Overall, Pinterest seems well-positioned for several more years of strong growth, and the current valuation leaves considerable room for multiple expansion as these gains materialize in earnings.