Many AI stocks have inflated valuations, making it tough for followers of Warren Buffett’s investing style to find good buys.
For investors seeking value in the AI sector, three companies that stand out are Micron, Dell, and Google’s parent Alphabet.
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Stock market guru Warren Buffett is renowned as a value investor who believes that it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Yet applying Buffett’s approach to the artificial intelligence (AI) market can prove challenging. Finding reasonably priced AI stocks isn’t easy in this hot sector, but good values do exist.
Three of them are Micron Technology(NASDAQ: MU), Dell Technologies(NYSE: DELL), and Google parent Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG). These businesses offer exposure to different areas of the AI sector, and Buffett-minded investors might find this trio particularly appealing. Here’s a deeper look into these companies.
Image source: Getty Images.
Founded in 1978, Micron specializes in computer memory and storage solutions. This year, it invented a 1-gamma memory chip, the world’s first, according to the company.
This memory chip is the smallest available today, and it enables more components, making it faster and more powerful. These desirable traits for AI hardware make the chip’s small size ideally suited to support AI on mobile devices.
That kind of technological breakthrough makes Micron’s products popular for AI. For example, its high-bandwidth memory chips crossed $1 billion in sales for the first time in the company’s fiscal second quarter, ended Feb. 27. As a result, the quarter’s sales reached $8.1 billion, up nearly 40% from the prior year’s $5.8 billion.
This strong sales growth led to fiscal second-quarter net income doubling year over year to $1.6 billion. Consequently, diluted earnings per share (EPS) soared to $1.41, up from $0.71 in the prior year.
Micron expects continued sales growth, forecasting third-quarter revenue to come in around $8.8 billion, a substantial increase from the previous year’s $6.8 billion. The company’s AI sales are on a roll, and with its new 1-gamma memory chip, it is poised for ongoing success in the AI era.
Dell sells servers, PCs, and other hardware to build AI systems. Its customers include the hot AI company CoreWeave.
It operates in a competitive space, but customers are hungry for hardware to power AI, and the company is capturing its share of this growing market. Sales increased 5% year over year to $23.4 billion in its fiscal first quarter, ended May 2. Chief operating officer Jeff Clarke said, “We experienced exceptionally strong demand for AI-optimized servers.”
Clarke’s comments are encouraging given the current macroeconomic volatility, which casts a cloud of uncertainty over customers’ information technology expenditures. Recent reports indicating the federal government is cutting tech spending caused Dell’s share price to drop.
But over the long run, AI demand positions Dell for sales growth. In fact, Q1 customer orders for AI hardware exceeded $12.1 billion. Mr. Clarke stated this result surpassed “the entirety of shipments in all of [fiscal 2025].” And in its 2026 fiscal year, Dell anticipates revenue hitting at least $101 billion, up from the prior year’s $95.6 billion.
Alphabet built proprietary AI and infused it into many of its products, including its Google search engine and its Google Cloud. The approach is paying off.
Adding AI to its search process led to growth in usage, helping Google’s first-quarter revenue reach $50.7 billion, up from $46.2 billion in the same quarter in 2024. Google Cloud’s first-quarter sales also saw AI-fueled growth, climbing to $12.3 billion from the prior year’s $9.6 billion.
Alphabet’s AI success propelled first-quarter revenue to $90.2 billion, compared to 2024’s $80.5 billion, and net income to $34.5 billion versus last year’s $23.7 billion. This catapulted diluted earnings per share to $2.81 from $1.89 in 2024.
The company’s stock was beaten down after losing two key antitrust cases brought by the U.S. government. However, management can appeal the decisions, meaning the legal battle is far from over and could extend for years before reaching a resolution, according to CEO Sundar Pichai.
In the meantime, AI is helping Alphabet’s business grow, and the company is determined to further advance its achievements in this area. It is aggressively investing in its tech infrastructure with plans for $75 billion in capital expenditures this year, up from 2024’s $52.5 billion.
Micron, Dell, and Alphabet have grown their businesses over decades, pay dividends, and have thriving AI solutions. These attributes suggest they’re Buffett’s brand of “wonderful companies” in the AI space.
But do their stocks trade for what he would categorize as a “fair price?” Here’s a look at all three of their forward price-to-earnings ratios (P/E) contrasted against AI giants Nvidia and Microsoft.
Data by YCharts.
Micron, Dell, and Alphabet all have forward P/E multiples significantly lower than Nvidia and Microsoft, suggesting this trio of AI stocks are a great value compared to their AI brethren.
Their performance to date shows Micron, Dell, and Alphabet are solid AI companies, and their compelling valuations make them ideal stocks for Buffett-style investors to buy and hold over the long term.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Robert Izquierdo has positions in Alphabet, Dell Technologies, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
These Artificial Intelligence (AI) Stocks Could Appeal to Warren Buffett-Style Investors was originally published by The Motley Fool
