Beyond the AI Hype: Two Undervalued Plays for Portfolio Diversification

As artificial intelligence stocks continue commanding premium market valuations heading into 2026, growing concerns about unrealistic growth assumptions are reshaping investor strategies. Many market participants are now actively seeking exposure beyond the AI sector. Here are two compelling value opportunities—Sprouts Farmers Market (NASDAQ: SFM) and Crocs (NASDAQ: CROX)—worth considering for those looking to rebalance their holdings.

Sprouts Farmers Market: Grocery Resilience in Uncertain Times

Sprouts Farmers Market presents an interesting contrast to the current market obsession with artificial intelligence. While the stock has experienced a significant pullback—down approximately 53% from its 2025 peak—the underlying business fundamentals tell a different story.

The health-focused grocery chain is navigating a temporary sales deceleration. Fourth-quarter comparable-store sales are projected to grow just 0%-2% year over year, a noticeable slowdown from last year’s 10% growth rate. However, this deceleration reflects a tough prior-year comparison rather than fundamental weakness. For the full 2025 year, management still guides toward 7% comparable-store sales growth, with long-term expectations of low-to-mid single-digit expansion—a rate that modestly outpaces inflation in input costs.

The real growth engine lies in expansion. With 464 locations currently operating, the company targets 10% annual unit growth through geographic expansion and market densification. This roadmap provides sustainable revenue growth potential over the next decade—a sharp contrast to the uncertainty plaguing speculative tech valuations.

From a valuation standpoint, Sprouts trades at a forward price-to-earnings ratio under 16x, which appears attractive for a retailer positioned to grow above-average rates. This multiple offers meaningful margin of safety for value-oriented investors seeking grocery-sector exposure.

Crocs: The Eccentric Brand Finding Its Footing Globally

Crocs represents another compelling contrarian opportunity. The maker of distinctive plastic footwear has also experienced substantial selling pressure, with its stock down around 50% from recent highs—mirroring Sprouts’ decline.

North American challenges are real. Domestic sales fell approximately 9% year over year in the most recent quarter, reflecting genuine headwinds in the company’s largest market. Apparel brands typically face more volatility and unpredictability than essential-goods retailers, and Crocs is no exception.

Yet the international story is accelerating. Outside North America, revenue grew 6% year over year last quarter and is on track to eclipse domestic revenues in the near term. This geographic diversification should provide meaningful support to overall growth as the North American market stabilizes—a realistic scenario given the brand’s two-decade history of consumer resilience.

Management is actively returning capital to shareholders through aggressive buybacks. In the latest quarter alone, the company repurchased 2.4 million shares from its 52-million-share outstanding base, representing a pace that will materially accelerate earnings-per-share growth over time.

Most striking: Crocs trades at a forward P/E ratio of just 7x, one of the cheapest valuations available in the consumer discretionary space. Combined with the buyback program, this valuation floor provides substantial downside protection.

The Case for Portfolio Diversification Away from AI

The artificial intelligence enthusiasm dominating markets today exhibits several characteristics common to past speculative cycles: extraordinary revenue expectations, elevated valuations commanding premium multiples, and massive capital allocation chasing projected demand that may not materialize as anticipated.

This doesn’t necessarily mean an AI correction is imminent or inevitable. However, prudent portfolio construction doesn’t require certainty about a bubble’s timing to warrant defensive positioning. Even investors with modest skepticism about current AI valuations benefit from holding traditional value assets as stabilizers.

Sprouts Farmers Market and Crocs offer paths to reduce concentration risk while capturing meaningful valuation discounts. Neither stock requires betting against the AI sector entirely—only incorporating balance through time-tested business models trading at historically attractive multiples.

Consider blending speculative growth exposure with proven value operators. The risk-adjusted returns over a market cycle often reward those who diversified away from consensus themes before inflection points arrive.