The "Magnificent Seven" Stocks: Here's the 1 I'm Buying Hand Over Fist Right Now
Key Points
Alphabet is one of the only true vertically integrated AI companies.
Google Cloud is third (behind AWS and Azure) but is growing the fastest.
Alphabet has the lowest P/E ratio among the "Magnificent Seven" stocks.
- 10 stocks we like better than Alphabet ›
The "Magnificent Seven" stocks consist of Nvidia, Apple, Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Meta Platforms, and Tesla. The term was coined in 2023 when the group drove much of the market's growth.
Their momentum has slowed a bit this year, but they're still seven of the world's 11 most valuable public companies, with Tesla the smallest at a market cap of $1.5 trillion (as of Sept. 22). Each Magnificent Seven stock has a legitimate investing case (I personally own four individually), but the one that stands out as the best investment right now is Google's parent company, Alphabet.
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The one-stop AI shop
Over the past few years, the popularity of the Magnificent Seven stocks has revolved around the current AI boom. While some companies rely heavily on third parties, Alphabet's advantage is that it's a vertically integrated AI company with its hand in most parts of the AI ecosystem:
- Hardware: Google builds its own advanced AI chips, including the popular Tensor Processing Units (TPUs), which allow it and other companies to train, tune, and deploy AI models.
- Google DeepMind: A research arm that focuses on creating safe and responsible AI systems. It's credited with some of the most important AI research over the past decade, helping AI become the powerful tool we interact with today.
- Google Cloud: The third-largest cloud platform in the world (behind AWS and Azure), providing critical infrastructure that companies rely on to build, scale, and run their own AI applications.
- Gemini: The second-most used AI chatbot, trailing only OpenAI's ChatGPT. It's also the second-fastest-growing chatbot behind Anthropic's Claude.
Alphabet still relies on other companies -- such as Nvidia for GPUs and Taiwan Semiconductor Manufacturing for manufacturing its custom chips -- but much of its AI development happens in-house. This helps reduce costs and lets Alphabet control much of its own destiny, since it isn't reliant on other companies' timelines or pricing models.
The cherry on top is that Alphabet has billions of users across its products and services, enabling it to distribute its AI tools virtually instantly. That combo makes me confident that, regardless of how the current AI arms race plays out, Alphabet will be a long-term winner. AI is a benefit, not critical to its survival.
Image source: The Motley Fool.
Google Cloud's momentum is strong
Google Search will always be Alphabet's bread and butter, but Google Cloud is its most promising business right now. I don't foresee it surpassing Amazon's AWS or Microsoft's Azure in market share, but with the overall growth of the cloud industry, third place is still a lucrative position to be in.
Here is how Google Cloud's year-over-year revenue growth over the past four quarters compares to AWS and Azure:
| Quarter | Google Cloud Revenue Growth | AWS Revenue Growth | Azure Revenue Growth |
|---|---|---|---|
| Q2 2026 | 82% | 37% | 43% |
| Q1 2026 | 63% | 28% | 40% |
| Q4 2025 | 48% | 24% | 39% |
| Q3 2025 | 34% | 20% | 40% |
Data sources: Alphabet, Amazon, and Microsoft earnings releases.
Google Cloud's smaller size contributes to its higher growth rates, but its growth over the past few quarters has been impressive nonetheless. It should continue to grow impressively, with its backlog at $515 billion (up from $465 billion in Q1).
Alphabet said it hopes to recognize at least half of that backlog over the next 24 months. Assuming it does, that's a nice revenue windfall headed its way over the next couple of years.
A good value worth considering
I'm a firm believer that great companies aren't always great investments if the price tag is too high. In Alphabet's case, it's valued fairly given its business dominance and growth trajectory.
At the time of writing, its stock trades at 17.6 times earnings, the lowest of the Magnificent Seven stocks, and well below its five-year average. At its current levels, Alphabet's stock has much more upside than downside. It's well worth buying right now.
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Stefon Walters has positions in Apple, Microsoft, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.
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