2 AI Stocks Trading at a Discount Right Now That I Think Wall Street Has Wrong

I used to think the biggest opportunities in tech were hiding inside flashy artificial intelligence (AI) models or chip companies. I've spent a lot of time over the last couple of years chasing beaten-down big-name stocks, but sometimes the more interesting story is a business quietly transforming its products and subscription model right under Wall Street's nose -- and both Arlo Technologies (NYSE: ARLO) and Evolv Technologies (NASDAQ: EVLV) look like companies the market still fundamentally misunderstands.

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Arlo Technologies is not a camera company anymore

This is the part Wall Street keeps getting wrong about Arlo Technologies: It still prices the stock like a consumer hardware business, even as the company has spent the last two years systematically converting itself into a pure software and services platform.

The camera hardware still exists, but it's increasingly just the vehicle that gets subscribers into Arlo's ecosystem. The real product is Arlo Intelligence -- a suite of AI features baked into the subscription platform that handles everything from package detection and person recognition to proactive security alerts that the company describes as moving beyond passive recording into automated, real-time response. Arlo isn't just storing video anymore. It's interpreting what's happening in front of the camera and deciding what matters.

What changed the story for me is the partnership strategy. In January, Arlo extended its relationship with Samsung in a service-only arrangement -- no hardware required -- to power smart security features inside Samsung SmartThings for millions of connected home users. That's a clean departure from selling cameras. It's licensing AI software to one of the world's largest consumer electronics platforms.

The market is still sitting on its hands. Some fair-value estimates on Arlo sit at $24 against a current price of around $13.50. Analysts covering the stock have an average price target of $22. The stock is down on a one-month basis, even as the business has turned profitable and annual recurring revenue is growing at a 28% clip. That's a gap between what the business is doing and what the market is crediting it for -- and such gaps tend to close over time.

Evolv Technologies is winning the venues, and Wall Street still isn't paying attention

Evolv Technologies (NASDAQ: EVLV) makes AI-powered weapons detection systems. Not drones or security towers, but scanners that use machine learning to identify concealed guns and knives without requiring people to stop, empty their pockets, or wait in slow security lines. Every major sports venue, arena, or school that replaces traditional security technology and metal detectors with Evolv's system is signing a subscription contract that is likely to be renewed and expanded over time.

The company has been stacking those contracts, and its pace hasn't slowed. In March, the Houston Astros renewed and expanded their partnership with Evolv to cover all fan entry points at Minute Maid Park. In April, Crypto.com Arena -- home of the NBA's Los Angeles Lakers and the NHL's Los Angeles Kings -- renewed and expanded its multiyear partnership. Later that month, Evolv reached 50% market share across all North American professional soccer venues after adding the Philadelphia Union to its roster. This is a pattern of the same customers coming back and asking for more.

The professional sports use case gets the headlines, but the deployment that I think is most underappreciated is in educational settings. In 2025, after Evolv reached a settlement with the Federal Trade Commission over what the regulator asserted were deceptive marketing claims, there was a window for some of the company's school customers to cancel their contracts -- but 92% of eligible K-12 customers chose to stay. That retention number, coming immediately after a regulatory challenge, tells you more about the product's actual value to customers than any press release would.

In my opinion, Wall Street is treating Evolv like a speculative security start-up that still needs to prove its model. However, the company's recurring contract structure, its retention rate, and its expansion pattern across professional sports, entertainment, and education suggest the model is proven. To me, that's the definition of a discount worth buying.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Arlo Technologies and Evolv Technologies. The Motley Fool has a disclosure policy.