The tariff-driven stock market sell-off has put the indexes into a correction phase, hitting artificial intelligence (AI) stocks hard. Many of these stocks lost one-third or more of their value, and a few sell for less than half of their recent highs.
However, the severity of the sell-off could help inspire a rebound in the second half of 2025. Advanced Micro Devices (NASDAQ: AMD) and The Trade Desk (NASDAQ: TTD) are two stocks that are well positioned to experience such a recovery.
1. AMD
AMD lost more than 60% of its value over the last 13 months. Initially, playing second fiddle to Nvidia in the AI accelerator market and the massive revenue declines in AMD's gaming and embedded segments hit this stock hard. More recently, tariff fears and the specter of sales restrictions to Chinese customers inspired further selling.
Nonetheless, investors have reason to believe in a rebound in the second half of the year. For one, AMD continues to make advancements with its AI accelerators, with a planned release of the MI350 later this year and the MI400 in 2026.
Also, on June 12, CEO Lisa Su plans to speak at the company's Advancing AI 2025 livestream event. The company said the event would exhibit AMD's vision for AI, which could revive interest in the stock if investors buy into AMD's plan for success.
Moreover, the outlook has improved for its lagging sectors. The 33% drop in yearly revenue for the embedded segment in 2024 showed signs of stabilizing in the fourth quarter, and the 58% revenue decline in the gaming segment for the same period is unlikely to repeat.
Hence, even though revenue grew by 14% in 2024, analysts forecast a 22% rate for this year, and that increasing growth rate could revive optimism.
The company's rising revenue growth should also boost profitability and bring about a low valuation. Although its trailing P/E ratio is 88, a forward P/E ratio of 19 arguably makes AMD a bargain. That factor alone could drive investors into AMD stock while it sells at such an attractive forward earnings multiple.
2. The Trade Desk
AMD is not the only lower-priced stock; perhaps no AI stock has seen a more significant reversal of fortune this year than The Trade Desk. Investors had flocked to this stock amid the rising popularity of its buy-side digital advertising platform.
The company allows advertisers and ad agencies to manage ad campaigns, leveraging data capabilities to deliver the highest returns on ad spending. Also, since it is a neutral player, it does not have a bias toward a specific advertising platform, giving it a competitive advantage.
Consequently, The Trade Desk stock has long prospered, and the market had arguably priced it for perfection until recently. However, stock prices fell off a cliff after the company missed its own revenue estimate, and the declines continued as a generalized sell-off weighed on the overall market. Since peaking in December, the stock has lost around 65% of its value.
Nonetheless, the P/E ratio, which briefly exceeded 225 in December, has now fallen to 64, its lowest level since 2018. Its forward P/E ratio of 28 also could make The Trade Desk a value stock at current levels.
Additionally, revenue rose 26% during 2024 to more than $2.4 billion, and even in Q4, when it fell short of its revenue estimate, the figure still increased by 22% yearly. This shows the company continues to grow at a significant pace.
Also, the company forecasts at least $575 million in revenue for Q1, which would amount to a 17% growth rate if that prediction holds. Though that would mean a sequential slowdown, the recent stock price decline likely prices in the revenue growth deceleration.
Given that conservative revenue forecast, the company is less likely to miss its own revenue estimate again. When also considering its lower forward P/E ratio, investors may decide to add shares while The Trade Desk seems less expensive.
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Will Healy has positions in Advanced Micro Devices and The Trade Desk. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and The Trade Desk. The Motley Fool has a disclosure policy.
