Here Is My Top Artificial Intelligence (AI) Stock to Buy During the Correction

Amid the recent correction in the S&P 500 and Nasdaq, some artificial intelligence (AI) stocks have plunged deep into bear market territory. In extreme cases, some stocks lost more than half their value within a few weeks.

Such was the case for The Trade Desk (NASDAQ: TTD). With a strong performance in 2024 and a high valuation, an unforced error turned investors against the stock after it reported its fourth-quarter and full-year 2024 earnings.

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Nonetheless, the drop may have redefined the stock's value proposition. Considering the company's bright future and heavily discounted stock price, now is likely an excellent time to add shares.

What The Trade Desk offers

The Trade Desk is a buy-side platform for digital advertising. Within its ecosystem, advertisers and ad agencies can use the platform to create, manage, and monitor the performance of digital ad campaigns across multiple channels.

In this sense, it holds a distinct competitive advantage over large digital advertisers such as Google parent Alphabet. While Google's platform is comparable in many respects, it will naturally have a bias toward its advertising business, which continues to make up the majority of that company's revenue.

The Trade Desk's platform holds no such bias. This makes it easier to target the advertising venues that will maximize a campaign's effectiveness.

Additionally, Alphabet is a tech conglomerate trying to diversify away from advertising. This means the company may focus less on its platform, arguably making The Trade Desk stock a more suitable choice for investors who want a pure-play advertising stock.

The Trade Desk and AI

The company's platform also stands out by better leveraging AI. This is not new for The Trade Desk, as it introduced its AI-powered Koa platform in 2018. Through Koa, deep neural networks helped predict clearing prices for real-time bidding auctions and gave ad placements a relevance score.

The company improved on this technology when it launched Kokai in 2023. Kokai applied Koa's technology to more aspects of media buying and upgraded its forecasting and measuring capabilities. This included added-value data from retailers and a TV Quality index to capitalize on opportunities related to connected TV.

Kokai's approach has increased efficiency and transparency, leveraging audience-based approaches to empower marketers to make more informed decisions.

The Trade Desk's financials

That perspective has served the company well, as its 2024 revenue surpassed $2.4 billion, and the 26% yearly increase exceeded the 23% growth rate in 2023.

Unfortunately for the company, its $741 million in revenue for Q4 fell short of the $756 million it had forecast in the previous quarter. Consequently, investors punished the stock further after it had come down from a peak closing high of $139.51 per share last December. As a result, the stock fell by almost 60% over 3.5 months.

Nonetheless, other numbers indicate traders may have overreacted. In 2024, net income of $393 million grew by 120%. Also, the first-quarter revenue forecast of $575 million will amount to a 17% revenue increase if that prediction holds. Although that would mean some slowing, its growth should continue at a rapid clip.

Furthermore, the P/E ratio of 72 may seem high, but it is not unusual for a growth stock, and the forward P/E ratio of 31 arguably gives bulls some justification for calling it a value stock.

Indeed, this is a change from early December when the P/E ratio was almost 230. Still, with today's heavily discounted earnings multiple, investors likely have an added incentive to buy shares in The Trade Desk.

Investing in The Trade Desk stock

Considering its technology and performance, the recent sell-off in The Trade Desk stock could make it a top buy during the recent correction.

Admittedly, missing its previous revenue projection was a glaring mistake, and the previous elevated P/E ratio left little room for such errors.

However, the company's platform is becoming increasingly essential to advertisers seeking to maximize the effectiveness of their campaigns. This is particularly true thanks to its improved Kokai platform, which has helped bring sustained revenue growth and considerable improvements in its profitability.

Moreover, its forward P/E ratio indicates The Trade Desk is on its way to becoming a value stock. That should make it a top AI pick, at least until more investors take notice and bid its share price higher.

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*Stock Advisor returns as of March 24, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Will Healy has positions in The Trade Desk. The Motley Fool has positions in and recommends Alphabet and The Trade Desk. The Motley Fool has a disclosure policy.