Jim Cramer Says Buy 2 Artificial Intelligence (AI) Stocks Down 24% and 46% Before They Soar

Meta Platforms (NASDAQ: META) stock is down 24% from its high, primarily because the market is concerned about the company's aggressive investments in artificial intelligence (AI). And Shopify (NASDAQ: SHOP) stock is down 46% from its high, mostly because the company gave soft guidance during its latest financial report.

Nevertheless, CNBC's Jim Cramer -- a former hedge fund manager who earned returns of 24% annually over 14 years -- believes both stocks are undervalued. "They've been thrown away by the impatient and the frightened, who are now giving you some tremendous entry points," he said last week on CNBC's Mad Money.

Wall Street generally agrees. Among 72 analysts, Meta Platforms has a median target of $817.50 per share, implying 36% upside from the current share price of $600. Among 53 analysts, Shopify has a median target of $150 per share, implying 55% upside from the current share price of $97.

Here's what prospective investors should know about these stocks.

Image source: Getty Images.

Meta Platforms: 36% upside implied by the median target price

Meta Platforms owns the three most popular social media networks in terms of monthly active users: Facebook, WhatsApp, and Instagram. The company uses consumer data generated by those platforms to recommend content and target ads, creating a network effect that makes its social media properties increasingly engaging.

Meta is leaning on artificial intelligence to supercharge that virtuous cycle. It recently debuted Muse Spark, a model that powers recommendations and content creation across its social media applications. It also powers the conversational assistant Meta AI, including a new feature called shopping mode that searches listings on Facebook Marketplace and the broader internet.

Investors are understandably nervous about Meta's plans to spend as much as $145 billion on capital expenditures this year, double the $72 billion it spent last year. But the market is overlooking signs that those investments are paying off. In the first quarter, ad impressions jumped 19% due to greater engagement, and average price per ad increased 12% due to greater demand.

These factors led to strong first-quarter financial results. Revenue increased 33% to $56.3 billion, operating margin held steady at 41%, and generally accepted accounting principles (GAAP) net income increased 62% to $10.44 per diluted share. "We had a milestone quarter with strong momentum across our apps," said CEO Mark Zuckerberg. "We're on track to deliver personal superintelligence to billions of people."

Wall Street expects Meta's earnings to increase at 14% annually through 2027. That makes the current valuation of 22 times earnings look quite reasonable, especially because Meta beat the consensus earnings estimate by an average of 6% in the last six quarters. Patient investors should feel comfortable buying a small position right now.

Shopify: 55% upside implied by the median target price

Shopify provides a turnkey solution for commerce. Its platform lets merchants manage their businesses across physical and digital storefronts. The company also offers adjacent financial services and tools for marketing, analytics, and logistics. Consultancy Gartner has recognized Shopify as a leader in digital commerce for three consecutive years.

AI promises to reshape commerce in the years ahead, and Shopify is on the cutting edge of that evolution. The company has developed a suite of AI tools (called Shopify Magic) that help merchants create content, build applications, surface insights, and automate tasks, like writing product descriptions and designing digital storefronts.

Additionally, Shopify worked with Alphabet's Google to develop the Universal Commerce Protocol (UCP), an open standard for agentic commerce. Think of UCP as a language that lets AI agents understand products, inventory, and checkout processes. Shopify is the only platform that enables agentic commerce across ChatGPT, Microsoft Copilot, and Google from a single system of record.

"The early signals on AI channels are really compelling," president Harley Finkelstein told analysts on the first-quarter earnings call. "AI-driven traffic to Shopify stores has grown 8x year over year, while orders from AI-powered searches have increased nearly 13x." Bain & Company estimates agentic commerce will account for 15% to 25% of all e-commerce by 2030.

Shopify reported encouraging first-quarter financial results. Revenue increased 34% to $3.1 billion, non-GAAP operating margin expanded two percentage points, and adjusted net income increased 44% to $0.36 per diluted share. Yet the stock is down 24% since the company reported its results because management's full-year guidance says revenue will increase in the high-20% range, implying slower sales growth for the rest of 2026.

Wall Street expects Shopify's adjusted earnings to increase at 29% annually through 2028. That makes the current valuation of 63 times adjusted earnings look tolerable, especially because Shopify beat the consensus earnings estimate by an average of 2% over the last six quarters. The stock is not cheap, but the current price is still the most compelling entry point in the past year.

Trevor Jennewine has positions in Shopify. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, and Shopify. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.