US stocks dominate the artificial intelligence (AI) sector. And the amount of money being generated by the big names, including Alphabet, Nvidia, and the picks and shovels of the segment, are quite frankly astonishing. Unsurprisingly, those stocks have surged.
However, some stocks haven’t performed so well, even though they’re well exposed to AI. In some instances this is because the market perceive AI to be a threat to their businesses.
So, today I wanted to look at two stocks that have pulled back over the past 12 months despite having important roles to play in the delivery of AI.
Salesforce
Salesforce (NYSE:CRM) is a leader in enterprise solutions. While this traditional enterprise solutions business has been slowing, there’s reason to get excited by its Agentforce operations.
Agentforce is a platform for creating and deploying specialised AI agents that automate tasks and workflows across a business. It uses generative AI to handle tasks, provide natural language responses, and make decisions grounded in a company’s specific data.
What’s more, Salesforce has a huge existing client-base, endless data, and some of the best software engineers around.
While some risks remain, especially the notion that an even bigger player could dominate with unmatched software — Microsoft ,for example — the stock’s valuation is undemanding.
It currently trades around 22 times forward earnings (P/E) and has a price-to-earnings-to-growth (PEG) ratio of 1.3. This is a 25% discount to the information technology sector average.
Analysts agree with this interpretation too with the average share price target being 28% above today’s price. That’s a decent sign of value. It’s definitely worth considering. It’s down 13% over the past 12 months.
Adobe
Adobe (NASDAQ:ADBE) shares are down 30% over the past 12 months. Clearly not a good return.
The concern is that programmes like OpenAI’s Sora 2 could undermine Adobe’s dominance in creative software by automating tasks that once required its flagship products.
Sora 2’s ability to generate photorealistic videos from text prompts, for instance, could threaten demand for Adobe’s tools like Premiere Pro and After Effects.
However, CEO Shantanu Narayen believes the market is mispricing the company. He recently told Bloomberg that investors have been overly focused on chipmakers and AI infrastructure providers, overlooking software firms that actually deliver AI-driven capabilities to end users. This is where Adobe, with a large existing client base, can excel.
Narayen argued that Adobe is “certainly undervalued right now,” highlighting the company’s profitability, growth prospects, and ongoing share buybacks as signs of confidence.
That confidence appears supported by the numbers. Adobe trades at a forward P/E of 16.3 — roughly 36% below the sector median and nearly 48% below its five-year average. Its forward PEG ratio of 1.14 is also a considerable (35%) discount to the sector.
Analysts consensus also suggests the stock is undervalued by 37%. That’s really noteworthy in the current, hot market.
While its momentum is poor and the market will need a catalyst to correct that, I believe Adobe is worth considering — or putting on the watchlist.
