3 No-Brainer Artificial Intelligence (AI) Stocks to Buy Now With $400

Artificial intelligence (AI) stocks were the driving force behind the S&P 500's impressive performances in 2023 and 2024. Unfortunately, they've also been the biggest drags on stock market returns in 2025.

While many of the top AI stocks have dropped in price, not every single one of them is worth investing in right now. However, the sell-off has provided smart investors with a lot more attractive entry points for several of the market leaders across cloud computing, software, and semiconductors.

Even if you missed out on the early boom in artificial intelligence, there's still plenty of time to catch up. With just $400, you could get started investing in AI with any of these three no-brainer stocks.

Image source: Getty Images.

1. Microsoft

Microsoft (NASDAQ: MSFT) has been a longtime investor in OpenAI, which put it in a strong position in late 2022 when generative AI started to take off. Its close ties with the leading AI company made its cloud computing platform, Azure, the top destination for developers looking to build on its foundation model.

Azure has become the growth engine behind the enterprise software giant. Revenue for the segment grew 31% in its most recent quarter, and that was driven by a 157% year-over-year increase in AI services. OpenAI remains a major customer for Azure, and it's committed to using Microsoft's cloud through 2030.

Importantly, Azure revenue could tick up in the second half of fiscal 2025. Management noted last year that it would take some time for its capital investments to come online. In its most recent earnings call, it said demand continued to outpace its available capacity. As such, investors should expect strong revenue growth going forward, and that could result in higher operating profits, too.

Microsoft's enterprise software business is getting a shot in the arm from AI as well. Its Copilot-branded AI agents help with software development for Github users and help other knowledge workers get the most out of Microsoft's leading productivity suite, Office. Microsoft also offers enterprise customers the ability to build their own Copilots, leveraging their own proprietary data and OpenAI's foundational models, with Copilot Studio. Microsoft has seen strong uptake on both, leading to double-digit revenue growth for its productivity and business segment.

After the pullback in the stock market, Microsoft shares trade for just $370 as of this writing. Investors with just $400 can buy a share of the stock at an appealing forward price-to-earnings ratio of 28. That's certainly a premium to the overall stock market, but Microsoft is a leader in AI on multiple fronts and a free cash flow machine. Management has used excess free cash flow to buy back shares, propping up earnings-per-share growth and further supporting its premium valuation.

2. Adobe

Many see artificial intelligence as a massive headwind for Adobe (NASDAQ: ADBE). It produces leading creative software for photographers, filmmakers, and designers, and marketing tools for creating and managing digital ad campaigns. As more AI-powered tools make digital creation easier, they pose a threat to Adobe's high-end software.

Adobe isn't standing still, though. It's developed its own AI model, Firefly, using its own stock photo and video library. Adobe touts its model as "commercial-safe," suggesting other photo and video models are trained on copyrighted material, and users could get in trouble for using them in commercial settings. The company has integrated Firefly into most of its products with features like Generative Fill in Photoshop, Text to Pattern in Illustrator, and Generative Extend in Premiere Pro.

Adobe continues to add new AI features to its software, which has enabled it to increase pricing for its services. AI features have also increased retention, boosting annual recurring revenue. Management says that AI-influenced average recurring revenue was more than $3.5 billion as of the end of 2024.

Over the next three years, management sees revenue climbing to $30 billion. That's up from $21.5 billion in 2024, for a compound annual growth rate of 12%. With consistent share repurchases, investors should see strong earnings-per-share growth well above that rate.

The stock currently trades at just 17 times forward earnings, which makes it an incredible value for the earnings growth it's set to achieve over the next few years. The risk of other AI-powered creative software taking share from Adobe appears to be weighing on the stock. But it seems to underestimate how high Adobe's switching costs are for existing users, and its ability to attract new users with free features in Express and low-cost entry points for paid subscriptions. That makes now a great time to put your $400 to work in shares of Adobe.

3. Applied Materials

Applied Materials (NASDAQ: AMAT) plays an essential role in producing all the semiconductors that make AI training and inference possible. It's the largest supplier of wafer fabrication equipment in the world.

That position is cemented by a couple of important factors. First, it benefits from a virtuous cycle, whereby it generates more revenue than any other equipment manufacturer, giving it more money to invest in research and development to make more advanced equipment. As it beats competitors to the market with better machinery, it's able to win additional contracts, further growing its market share. That's become especially true over the last two years, as demand for advanced tooling soared with the need for more AI accelerator chips.

The second factor working in Applied Materials' favor is that semiconductor manufacturers can't afford the downtime involved with switching to a new supplier. Completely overhauling a foundry would not only cost a lot in terms of equipment, but the cost of bringing workers up to speed with the new tools could be even more expensive. In other words, the switching costs are enormous.

Management doesn't see a big threat from tariffs, as indicated by its recent 15% dividend hike and massive share repurchase authorization. That suggests it foresees free cash flow continuing to grow, as there's continued demand for advanced chip designs that it's well suited to provide equipment for.

Applied has seen its stock fall considerably along with other AI semiconductor stocks in 2025. It now trades for less than $140 per share as of this writing, giving it a forward P/E of just 14.8. For $400, investors could snatch up a couple of shares of Applied's stock and hold them forever, as it benefits from a rock-solid moat in a growing industry.

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Adam Levy has positions in Adobe, Applied Materials, and Microsoft. The Motley Fool has positions in and recommends Adobe, Applied Materials, and Microsoft. 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.