![\"Thoughtful](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/08\/Ponderous-1200x800.jpg\")
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Image source: Getty Images<\/p>\n
I\u2019m always looking for new stocks to add to my ISA. So I asked ChatGPT for an undervalued artificial intelligence (AI) stock.<\/p>\n
Strangely, it gave me two answers and asked me to pick which one was best\u2026 I guess that\u2019s why we\u2019re still training it. <\/p>\n
The stocks it gave me were ASML and AMD. Two great companies, one known for its advanced lithography machines and the other for its chips and servers for AI. <\/p>\n
While these are great companies at the heart of the AI revolution, ChatGPT made no attempt to address their valuations as stocks. And valuation\u2019s the most important part.<\/p>\n
Because there\u2019s absolutely no point investing in the most promising companies in the world if they already vastly overvalued. <\/p>\n
For me, ASML and AMD are great companies, but the valuations don\u2019t offer a huge margin of safety at this moment in time. <\/p>\n
Alternative No 1<\/p>\n
One potentially undervalued way to gain exposure to the AI infrastructure boom is\u00a0Seagate Technology\u00a0(NASDAQ:STX<\/a>). <\/p>\n The shares have been among the S&P 500\u2019s top performers in 2025, driven by surging demand for high-capacity storage used in cloud computing and AI inference. <\/p>\n Recent results were strong, with a clear beat-and-raise quarter, expanding margins above 40%, and management lifting guidance.<\/p>\n Seagate\u2019s investment case is also reinforced by its cash-generation profile. In the most recent quarter, the group produced more than $500m of operating cash flow and over $400m of free cash flow, with margins benefiting from a richer mix of high-capacity Nearline drives sold into cloud and AI workloads.<\/p>\n Importantly, valuation still looks reasonable. Seagate trades on a forward price-to-earnings<\/a> of around 23 times, broadly in line with the sector, but its forward price-to-earnings-to-growth<\/a> ratio of about 0.9 is materially cheaper than peers. This suggests earnings growth isn\u2019t fully priced in.<\/p>\n The main risk is execution and competition. A stumble in the rollout of HAMR (Heat-Assisted Magnetic Recording) drives or market share gains by\u00a0Western Digital\u00a0could pressure margins and sentiment.<\/p>\n Alternative No 2<\/p>\n