The AI Stock Bubble Is Poised to Pop: 2 Undervalued Stocks to Buy Now

As we get ready to close the door on 2025, there's been increasing chatter around a possible stock market bubble in artificial intelligence (AI). These stocks dominate the market today, trade at premium valuations, and are priced based on rosy assumptions for future growth.

What if these assumption turn out overly optimistic? While there's been a lot of wealth created investing in AI stocks, it's entirely possible a downturn is coming if bears are correct about an AI bubble.

If you're looking to reduce your exposure to AI, here are two value stocks -- Sprouts Farmers Market (NASDAQ: SFM) and Crocs (NASDAQ: CROX) -- to add to your portfolio right now.

A grocery-store chain with economic resiliency

Over the last few years, Sprouts Farmers Market has been a phenomenal stock to own. Earlier this year, its three-year stock-price gains looked even better than some of the AI winners.

Today, shares are in a 53% drawdown from highs set earlier in 2025. Why? Because the health-focused grocery store is seeing slowing comparable-store sales growth.

Comparable-store sales growth measures revenue growth from existing Sprouts locations and is an important metric for tracking any physical retail location. In the fourth quarter, Sprouts is expecting comparable-store sales growth to slow to 0%-2% year over year.

Slowing same-store sales growth is never a good thing, but in this case should be taken in context. Last year, Sprouts produced tremendous comparable-store sales growth in the fourth quarter of over 10%, giving a tough comparison to this year. For all of 2025, management is still expecting 7% comps growth and expects to generate low- to mid-single-digit growth over the long term that slightly beats inflation on input costs.

Sprouts isn't just about generating revenue growth from existing stores, but expanding this concept around the United States. Right now, the company has 464 stores and believes it can expand at a 10% annual rate by moving into new regions and densifying current operations. This gives the business a durable opportunity to grow sales over the next decade.

Today, Sprouts stock trades at a forward price-to-earnings ratio (P/E) under 16, which is cheap for a company poised to grow at an above-average rate for the next decade.

Image source: Getty Images.

Strange shoes and a cult following

Another consumer brand that's hitting a temporary rough patch is Crocs, and investors have been beating up the stock. The maker of eccentric plastic sandals is also in a sharp drawdown from its highs, coincidentally around the same level as Sprouts' stock.

As an apparel brand, Crocs has a bit more uncertainty around future growth, compared to a durable grocery concept. However, the stock trades at an insanely cheap price and has a management team returning cash to shareholders.

Crocs is currently struggling in North America, where sales declined around 9% year over year last quarter. While the company is going to have fits and starts without smooth growth, the brand has proved resilient in North America over the last two decades, currently remaining popular for aquatic activities and among younger shoppers.

Internationally, the brand is beginning to shine. Revenue was up 6% year over year last quarter outside of North America and is on pace to surpass its North American business shortly. This should help buoy any concerns around falling sales in the United States.

Today, Crocs trades at a forward P/E ratio of just 7, and management is now beginning to repurchase loads of its outstanding stock. Last quarter, it retired 2.4 million of its 52 million outstanding shares, which is a pace that will help accelerate earnings-per-share (EPS) growth in the years to come.

SFM P/E Ratio (Forward) data by YCharts.

Is AI truly in a bubble?

A lot of people are now worried about an AI bubble. It's hard to make any black-and-white claims about a fast-moving sector, but an investor doesn't need to have 100% conviction we're in an AI bubble to want to minimize their exposure to the sector, given the risks of overvalued stocks.

AI stocks may or may not be in a bubble if you look back a decade from now. However, it does have a lot of characteristics of past bubbles -- namely, huge levels of revenue growth, high valuations, and investing in front of projected future demand.

Don't put your entire portfolio into AI stocks. Mix in some value names, such as Sprouts Farmers Market and Crocs, as well.

Brett Schafer has positions in Crocs. The Motley Fool has positions in and recommends Sprouts Farmers Market. The Motley Fool recommends Crocs and recommends the following options: long January 2028 $75 calls on Sprouts Farmers Market and short January 2028 $85 calls on Sprouts Farmers Market. The Motley Fool has a disclosure policy.