Why Google is the Premier MAG 7 Investment in 2026

TradingKey - A shift has occurred regarding how investors view AI companies. The initial excitement about expanding investments into AI applications (the AI hype) has come to an end with investors looking for proof that AI technology can create value through products and infrastructure that are robust enough to last beyond the hype cycle.

Alphabet Inc. (GOOG) (GOOGL) is a strong choice among the "Magnificent Seven" because, in addition to having a highly successful core product (its search engine), it has built unique vertical integrations across all segments of the AI ecosystem, from custom chip development and Cloud Computing to ways in which it can monetize AI research and technology through apps for consumers.

Alphabet is much stronger than Microsoft (MSFT) or Amazon (AMZN) due to its unparalleled data advantage and better valuation when comparing how retail investors are viewing these companies for the foreseeable future.

Google's Financial Resilience and Valuation Edge

In 2026, this is why you need to own Alphabet stock over the competitor. When looking at Alphabet’s valuation versus its long-term potential for future growth, Alphabet is trading at approximately a forward Price to Earnings (P/E) of about 27 based on 2026 estimates, whereas Microsoft is frequently trading at a P/E of at least 30 (or higher). Alphabet is expected to have an annualized earnings growth rate of 15%.

How is Alphabet financially stable? The source of Alphabet’s financial muscle, however, is its ad business, which just had a record $87 billion in ad sales in one quarter. This is good for a 14% year-over-year growth. Since advertising is a cash cow for Alphabet, and it can now invest heavily in Artificial Intelligence while not having to take out giant loans, you end up with a virtuous cycle that just keeps getting better for Alphabet and worse for Meta (META). Unlike Meta, which has poured billions of dollars into AI with few revenues in any markets, Google has launched artificial intelligence products such as “AI Mode” and “AI Overviews” that it says significantly increase user engagement. Usage of “AI Mode,” which has been introduced to more than 100 million users in various regions around the world, has nearly doubled the number of searches that users are making, enabling monetization opportunities related to these search queries in the future.

Google Outpaces the Giants in the Cloud Race

The "Cloud Race" has gone from "who has the most cloud storage?" to "who has the best AI-based, scaling infrastructure" in just a few short years (2026). Although AWS and Azure dominate the market with significantly larger shares, Google Cloud has emerged as the fastest growing cloud service provider among the three. GCP's revenue growth was estimated at 34–36% YOY as of Q3 2025, whereas AWS's was only ~19–20% YOY. Azure also had a strong increase of 34%, but the largest driver of its growth (~15%+) was from its AI solutions. The maturity of Azure's core infrastructure business is evident in the fact that so much of its growth is now being driven by the AI segment of the market, which is already in white-hot demand-wise.

The bottom line in this story is the RPO (Remaining Performance Obligation) or backlog of cloud services. By the end of 2025, Alphabet had an RPO of $155–$157 billion, representing nearly a 46% increase in merely one quarter (Q3 2025). The explosive growth in the cloud services backlog indicates that enterprises are moving the majority, if not all, of their core long-term business operations to GCP rather than simply "testing out" the AI services that Google makes available. This provides investors with much more visibility into a forward stream of revenue relative to AWS, which is now dealing with a much more mature and slower-growing base.

Google Experienced Operating Efficiency and Margin Expansion

When comparing Google Cloud's level of profitability on cloud services to AWS, a full-fledged cash cow, a common criticism revolved around a loss of profitability for its cloud services. That story has flipped in 2026. Operating income for Google Cloud services by the end of the 3rd quarter of 2025 had surpassed $3.6 billion, a record high. This represents a year-over-year increase of 85%.

The operating margins for Google Cloud have gone up by over 11% to over 21% within a single year, the most dramatic margin increase across the entire sector. Operating margins for AWS as an absolute value are greater than Google's, standing at approximately 33%. However, operating margins for AWS as a relative value have decreased as a result of the massive detriment to the operating margins of the AWS cloud services' aging non-AI hardware coupled with the super expensive Nvidia (NVDA) GPUs. Contrasting the margins of Microsoft and Amazon, Google's margins are less negatively impacted because Google vertically integrates with its own Tensor Processing Units (TPUs).

Google Has the AI-Native Infrastructure Edge

By 2026, the market understood that distinctions among AI clouds had opened. While Microsoft Azure acts more like a 'wrapper' for OpenAI, and AWS like a 'supermarket' for models through Bedrock, Google Cloud encompasses the broadest and best offering. Vertex AI is the only truly comprehensive, fully integrated, and unified AI stack, as it is the only offering that pairs comprehensive AI with analytics on the same global, high-speed infrastructure.

Gemini 3 has been noted as 'mind-blowingly good' and as such, GCP is in pole position for Google AI agents. Additionally, Google Cloud's proprietary silicon enables AI at a lower total cost of ownership. Notably, the fact that over 70% of existing Google Cloud customers are currently using its AI products offers a significant indicator of deep ecosystem 'stickiness' for investors.

Google's Vertical Integration Through Its Custom Silicon and AI Models

Alphabet is shielded from erosion of margins in the long term thanks to the 'Ironwood' (TPU v7) custom AI chips. While Amazon is making improvements with the Trainium 3 chips, Google has a ten-year head start and offers better, co-designed hardware-software TPUs. By 2026, these TPUs will provide performance-per-dollar value that is four times superior to the average Nvidia GPUs, with a lower price and better performance for AI inference tasks.

Because of this vertical integration, Google is able to run Gemini, along with other large-scale AI models, more efficiently than competitors. For the investor, this means that as AI service demand increases, Alphabet will be able to provide it at lower costs while the margins will be higher. This is the most significant factor considering that AI computing costs are skyrocketing and becoming a bigger part of the expenditure for the tech giants.

Is Google's Monopoly a Question?

In past years, a major overhang on Alphabet was the risk of an antitrust breakup, particularly around the Chrome browser and Android OS. But late 2025 legal rulings have practically eliminated this “tail risk.” Courts pushed back against the Department of Justice’s demand for the divestiture of Chrome, establishing rules that would require Google to share some search data with rivals.

The result is a huge win for Alphabet. It maintains the company’s “proprietary ecosystem,” which analysts and investors have come to view as impenetrable. With the risk of breakup essentially defused, the “regulatory discount” that has held Alphabet’s share price back is dissipating, and the stock is poised to reach for the skies—with some analysts seeing a $600 price by the decade-end.

Google is a Neutral Play among the MAG 7 Stocks

The chances the company has of growing earnings are further evidenced by the spread of the current market share—AWS has 31%, Azure has 25%, and Google Cloud is at 13%—which will become the basis of the bull case for Alphabet in 2026. Starting from a smaller base and growing at almost double the rate of its big competitors in important verticals, Google Cloud has the widest opportunity. With Google Cloud starting to drive a greater share of Alphabet's operating income, the market will likely begin to re-rate Alphabet.

For most investors, Alphabet is a fairly neutral play among the "Magnificent Seven." It gives the potential AI-driven growth of a startup and the stability and cash flow of an established company. While Nvidia is the undisputed champion of hardware and Microsoft rules the enterprise software market, Alphabet is directly in the middle of the two, managing the border to the internet with Search and the infrastructure of tomorrow with Google Cloud. Alphabet is the most logical option given the current market conditions and its evident path to AI monetization.