2 Beaten-Down AI Stocks to Buy Before the Next Bull Market

Although it’s still officially in a bull market overall, the artificial intelligence (AI) investment sector may have something to say about that claim.

Many AI stocks are down more than 20% from their all-time highs, knocking them out of bull market territory on an individual stock basis. However, once geopolitical tensions stabilize and investors realize that AI spending will last for many more years, some of these stocks are slated to rocket higher.

Two that I have my eye on that are down at least 20% from their all-time highs are Microsoft (MSFT +0.63%) and Broadcom (AVGO 2.39%). Microsoft is down more than 30%, while Broadcom is down nearly 25%. Each of these stocks has bright long-term prospects, and now is the time to scoop up these two before the market catches on.

Microsoft

Almost everyone is familiar with Microsoft’s business, and the majority of office workers interact with Microsoft’s software on a daily basis. Microsoft has also expanded its footprint into generative AI and is a key host for many leading generative AI companies. This is all done on its Azure cloud computing platform, and this business unit has seen impressive growth recently.

During the second quarter of fiscal year (FY) 2026, Azure’s revenue rose 39% year over year. That helped lead Microsoft’s overall revenue growth to 17% — one of its best quarters in the past decade.

So, the question remains: Why is Microsoft stock selling off so much? The only good explanation I have is that Microsoft is being wrapped up in the general sell-off of software companies, as there is a notion that AI agents can rewrite most of this software, which would eliminate the need for many of Microsoft’s subscriptions. I don’t see this happening, as most of Microsoft’s software is business-centric, and the cost of having this software fail is far greater than that of just paying Microsoft the subscription fee.

Regardless, Microsoft’s sell-off has brought the stock to a point I can hardly believe. I like to use the operating price-to-earnings (P/E) ratio with Microsoft’s stock because it ignores the effects of investment gains, which Microsoft has a lot of thanks to its OpenAI investment. If you utilize this metric, Microsoft is approaching the lowest point it has seen in the past decade.

MSFT Operating PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.

Remember, Microsoft really isn’t displaying any weakness in its business right now, so I think there has seldom been a better time than right now to buy Microsoft stock.

Broadcom

Broadcom is in a different boat than Microsoft. Broadcom’s management has told investors that they expect monster growth over the next two years, but the market hasn’t fully priced that growth into the stock yet.

Broadcom does a lot of different things as a business, but its most exciting segment is its custom AI chip business, which is rapidly taking off. Broadcom partners with AI hyperscalers to design a chip specifically suited to their needs, which can cut down on costs and improve performance.

In Q1 FY 2026 (ending Feb. 1), the division that custom AI chips are in saw its revenue increase 106% year over year to $8.4 billion. However, CEO Hock Tan told investors that its custom AI chips alone will generate $100 billion or greater revenue by the end of next year.

That’s a huge jump and represents this division’s revenue at least tripling in just two years. Over the past 12 months, Broadcom generated $68 billion in revenue, so its overall revenue is slated to skyrocket as well. Despite this, Broadcom’s stock is off from its all-time high.

With the massive growth going on in the AI industry and Broadcom’s product likely to capture some market share, I think now is the perfect time to load up on its stock.