Is This the AI Stock That Could Turn $100,000 Into $1 Million?

When most investors think of artificial intelligence (AI) stocks that can become 10X investments, they think of chipmakers, software developers, and data center operators, just to name a few. But it could be a smart idea to go outside the box to find hidden opportunities that are being overlooked by the market.

One in particular worth a closer look is PayPal (NASDAQ: PYPL). Not only is the leading payments company executing on its core growth strategies incredibly well, but it has more potential to grow through AI initiatives than you might think. Here's why this ridiculously cheap stock could be the next AI 10-bagger.

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All-in on AI

PayPal isn't typically thought of as an AI stock, but it should be. Not only has PayPal been using AI for years to improve its product, but the most exciting developments in recent months have all been AI-related.

Just recently, along with its third-quarter earnings, PayPal and OpenAI announced a partnership for the company to enable instant checkout through ChatGPT. At the same time, PayPal also announced the launch of a suite of agentic commerce solutions, such as catalog and order management, as well as an agentic payment solution.

In September, PayPal announced a multiyear partnership with Alphabet's Google to develop commerce solutions to make online transactions easier and more secure. This allows PayPal to leverage Google's AI capabilities, and the partnership includes embedding PayPal solutions across Google's platforms.

These are just some of the most recent announcements, and there have been plenty of others over the past year or so. But a key takeaway is that all these things have massive potential for PayPal's business, but will take time to show up in the numbers.

Recent results have been incredibly strong

PayPal's third-quarter results handily beat expectations on most metrics, including the 7% revenue growth and 12% increase in adjusted EPS. Transaction margin growth was strong, and the business generated $2.3 billion in adjusted free cash flow.

Beyond the headlines, PayPal reports that its buy-now-pay-later (BNPL) and omnichannel (in-store) solutions are growing rapidly, as is revenue from the ultra-important Venmo side of the business. In fact, Venmo payment volume grew 14% year over year, and Venmo revenue grew by 20%, indicating that the company is doing a great job of boosting monetization.

Meanwhile, BNPL payment volume is growing at a rate of more than 20%, and with a recently announced 5% cash back rate on BNPL transactions during the holiday shopping season, it wouldn't be a shock to see this accelerate.

Additionally, enterprise payment growth (a focus area for management) appears to have reached an inflection point, posting its best growth rate in a year, which management expects to accelerate into the end of the year. Plus, PayPal is in a soft-launch phase of PayPal World, which integrates PayPal, Venmo, and several other commerce tools in a single platform. To say that this could be a big engagement driver would be an understatement.

Thanks to the strong performance, PayPal increased its full-year earnings guidance, now expecting 15%-16% adjusted EPS growth compared with 2024.

The combination of incredible profits and over $14 billion in cash on the balance sheet has allowed PayPal to continue buying back stock aggressively ($6 billion expected in 2025), and the company also announced its first-ever dividend.

A ridiculously cheap AI stock with 10X potential

PayPal stock trades for a remarkably cheap valuation right now. Even after the post-earnings pop, the stock trades for about 14 times the company's full-year adjusted EPS guidance and at an even lower multiple of free cash flow.

PayPal's management team is executing remarkably well, and some of the most exciting recent developments aren't even showing up in the numbers yet. If the company's AI ambitions turn out to be a true needle-mover and some of the other growth initiatives help PayPal achieve management's stated target of sustainable 20%-plus EPS growth, it's entirely possible the stock could be a 10-bagger over the next decade or so.

Matt Frankel has positions in PayPal. The Motley Fool has positions in and recommends Alphabet and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short December 2025 $75 calls on PayPal. The Motley Fool has a disclosure policy.