2 Battered Artificial Intelligence (AI) Stocks Due for a Massive Summer Rebound

The market has had an up-and-down year, but there are a few stocks that are taking a bigger beating than most. Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META) are two major underperformers in the tech realm, and have lost investors' money in 2026. So far, Meta is down around 12%, while Microsoft is nearly down 20%.

That's some poor performance from two stocks that have been historically great investments, and I think each could turn it around and be excellent performers before 2026 is over. Here's why.

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Microsoft

It's hard not to appreciate Microsoft's strategy in the artificial intelligence (AI) era. It has several strategies, and all of them seem to be paying off just fine. The launch of Copilot has been incredibly successful, and this business now has $37 billion in annual revenue, growing at a 123% year-over-year pace. This allows its business productivity tools to integrate seamlessly with AI and boost productivity.

However, if clients turn sour on Copilot, it also has a thriving cloud computing division that's powering AI workflows. Azure grew at a 40% year-over-year pace in its most recent quarter, showcasing strong demand for computing infrastructure. So, even if its own internal AI tools don't pan out, it can benefit from other companies building great AI products on its platform.

Lastly, Microsoft is a major OpenAI investor and owns around 27% of the company. Rumors are starting to swirl of an impending OpenAI IPO, and it could be worth more than $1 trillion when it hits the public market, giving Microsoft a massive payday if it chooses to sell its stake.

Microsoft is really doing great as a company, yet the market doesn't agree. It now trades for 20.2 times forward earnings, which is less than the S&P 500 at 21.7. Microsoft's reputation, growth, and strategy don't reflect a stock that should trade at a discount to the broader market, and I think it could easily rebound through the second half of 2026 as a result.

Meta Platforms

Meta is in a similar boat to Microsoft, as it's valued at just 17.9 times forward earnings, but it may have earned at least a portion of its undervaluation compared to the S&P 500. Meta is likely better known by its former name, Facebook. However, with the collapse of the metaverse, Meta would likely be better off changing its name back to Facebook, as it's more representative of the company that it is.

Nearly all of its revenue comes from advertising on its social media platforms like Facebook, Instagram, Threads, and WhatsApp. In Q1, its revenue increased at a 33% year-over-year pace. However, the market doesn't really care about how good its core business is doing. Instead, it's focused on how much it's spending on AI infrastructure. Meta is pouring hundreds of billions into AI, yet it really isn't generating much of a return on investment outside of the improvements it has made to its advertising platform.

That's the primary reason why the market is bearish on the stock, but that could easily turn around if Meta can deliver on its promise to make a superintelligent model that interacts with the world around you via AI glasses. If Meta can deliver that, the stock could easily turn around. However, it may be a few years away.

In the meantime, Meta is a strong advertising business that investors should be mostly focused on. However, that's not current market sentiment, and this mismatch can give investors the edge they need to make great long-term returns with Meta's stock, as the market will eventually come back around to valuing the advertising business for the dominant company that it is.

Keithen Drury has positions in Meta Platforms and Microsoft. The Motley Fool has positions in and recommends Meta Platforms and Microsoft. The Motley Fool has a disclosure policy.