2 Undervalued AI Stocks With Room to Run
What the next phase of the AI boom could mean for these two companies, and why we see upside ahead.
On the Oct. 26, 2026, episode of The Morning Filter podcast, guest host Sarah Hansen and Morningstar Chief US Market Strategist Dave Sekera discuss why Broadcom AVGO and Amphenol APH stock are picks today. Here is an excerpt from the show.
Why Broadcom Stock Is a Buy
Sarah Hansen: Today, Dave, you’ve brought us five names that are trading at big discounts, some on the order of 20% or more. First up on your list is Broadcom AVGO. Walk us through Morningstar’s view.
David Sekera: Broadcom currently trades at a 50% discount to our long-term intrinsic valuation. More than enough to put it well into 5-star territory, not necessarily one for dividend investors; it only pays a 0.8% dividend yield. It is a stock we rate with a High
Hansen: Why is Broadcom a buy? What’s the investment case there?
Sekera: The investment case here is that the company makes what’s called custom AI accelerators. They’re known as XPUs, and XPUs are used to optimize artificial intelligence workloads. Generally, we think right now the market is underestimating the growth prospects for XPUs. In fact, I really think this is probably the next wave of upside that we’re going to see in AI chips following Nvidia’s NVDA GPUs, which are more general-purpose use chips. I think, to some degree, what the story is is that we think the market right now is overly concerned that Google, which is one of their biggest customers, is multisourcing its TPUs, which are a type of XPU from other vendors, and that could then erode Broadcom’s business over time. We just don’t think that’s true. We think this is just much more of a natural multisourcing from Google than it is necessarily trying to replace Broadcom over time.
If we look at our forecast here, I mean, right now we’re looking at 67% revenue growth, and that’s using the management guidance for 2027 and 2028. So, huge growth over the course of the next two years. Our five-year compound annual growth rate for revenue and earnings is 46% and 53%, respectively. We’re looking for the company to do $18.85 in earnings in 2027, which means that the stock is only trading at a 19-times forward multiple. Look at our 2028 earnings of $30 forecast, the company’s only trading at 12 times a two-year forward multiple. We think that the company has just significant growth prospects over the next couple of years. There’s a lot more to the story. I did do a deep-dive podcast with Will Kerwin a couple of weeks ago. I think it was on Sept. 24. The title of that is Why Broadcom is Worth $650. If that’s one that you have an interest in, I’d highlight that podcast to go watch and really listen to Will’s investment case on the stock overall.
Why Amphenol Stock Looks Undervalued
Hansen: Great. Last one, we made it. Amphenol APH. This is one where I hear that name, and I think AI “picks-and-shovels,” that theme that we just can’t get away from.
Sekera: Exactly.
Hansen: Walk us through the numbers there.
Sekera: Yeah. Amphenol is a 4-star-rated stock trading at a 26% discount to fair value, only 0.7% of a dividend yield, but we rate this one with a Medium Uncertainty and a wide economic moat, that wide moat being based on switching costs and intangible assets.
Hansen: Now, is Amphenol a stock to buy for the long term, or is this a rental stock while certain market forces are at play?
Sekera: I would say this is probably one that’s going to be much more in that rental category than it is necessarily a long-term kind of buy-and-hold type of stock. This is one where, if you want to play that continued AI buildout boom thesis, this is really the last one that we see of the commodity tech hardware stocks that’s still undervalued. Now, I do have to caution: Their earnings come out, I think, this week on the 28th before market open. Granted, it is trading at a pretty good discount to fair value, but I think this is one you could probably wait and see what the numbers are before you’re buying, see if maybe there’s any change to their guidance here.
Right now in our model, we’re looking for the company to do $36 billion in revenue this year. We’re looking at a 21% compound annual growth rate over the next five years, so that would get them up to $60 billion in top line by 2030. We’re looking for an operating margin this year of 28%, looking for some expansion there to 30% by 2030. Right now, the stock’s trading at 26 times this year’s earnings projection of $2.84. That drops to 21 times our earnings projection of $3.60 next year. Assuming everything kind of comes out as we expect this quarter, I think there’s still enough upside in this one that even if the stock pops a couple percent after earnings, there’s still enough margin of safety that you could play this one to the upside. But like I said, I wouldn’t necessarily get ahead of earnings on this one.
Subscribe to The Morning Filter on Apple Podcasts, or wherever you get your podcasts, and keep up with the latest research from hosts Susan Dziubinski and David Sekera, and guest host Sarah Hansen on Morningstar.com.
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The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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