Apple is the Best-Performing AI Stock in the “Magnificent Seven” This Year, and Alphabet is the Worst. Here’s the Better Buy for 2027.

The "Magnificent Seven" tech stocks are known for their strength in earnings and stock performance. These well-established powerhouses have led the S&P 500 on its bull market journey, helping the benchmark to climb 78% over the past three calendar years. But this year has been a bit rocky for technology companies, as investors worried about a variety of challenges -- from rising inflation to the risk of a potential slowdown in AI spending.

As a result, four of the "Magnificent Seven" companies are heading for gains this year, and the other three are on track to post declines. Apple (NASDAQ:AAPL) is the best performer by far, advancing 29%, while Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is the worst-performing AI stock, declining more than 8%. (Though Tesla, down 15%, is also present in AI, it's primarily an electric vehicle player.)

Which stock -- Apple or Alphabet -- makes a better buy for 2027? Let's find out.

Image source: Getty Images.

The case for Apple

Apple doesn't need much of an introduction. The company has become a household name thanks to the popularity of its iPhone, the world's top-selling smartphone, as well as other leading products such as the Mac and iPad. Apple's solid moat, or competitive advantage, is its brand. Customers like the products so much that they keep coming back, even when the company raises prices as it did recently.

In fact, Apple just reported September quarter records in total revenue, iPhone revenue, and earnings per share. And Apple is now launching new products, including its first foldable smartphone and a touchscreen Mac, items that could generate revenue gains during the holiday season and beyond.

Apple didn't soar as much as other tech giants in the earliest stages of the AI boom, as it took a slower approach to the technology. But it recently launched a new Siri AI assistant, and this, along with other AI features across its devices, makes it a solid AI player today.

Though Apple stock has outperformed other "Magnificent Seven" stocks, these new products, along with excitement about new chief executive officer John Ternus' product expertise, could lead to further gains.

The case for Alphabet

Alphabet may not be a household name, but its biggest business is: I'm talking about Google Search. Many of us use the platform on a daily basis, and this helps the company generate revenue -- as advertisers promote across the Google platform to reach consumers.

This tremendous amount of revenue, along with the growth of Alphabet's core offerings through Google Cloud, has helped the company fund its AI presence. Alphabet makes AI chips, has developed the large language model Gemini, and sells these as well as products and services of others through Google Cloud. Amid the AI boom, Google Cloud's revenue has soared. In the recent quarter, it climbed 103% to more than $30 billion, and Alphabet is investing heavily in the AI infrastructure build-out to address current needs of its customers as well as future needs.

In spite of strong growth and forecasts for more on the horizon, Alphabet stock has declined this year. Investors have worried that Alphabet and other cloud providers are overspending on the build-out, and that the revenue opportunity may fall short of expectations. That's left Alphabet stock looking cheap, and this could attract bargain-hunting investors.

The better buy for 2027

Alphabet is clearly cheaper than Apple right now.

AAPL PE Ratio (Forward) data by YCharts

Some investors might take advantage of the opportunity and pile in -- that would be a wise move because the company's long-term story is bright. But, for 2027, Apple might continue to outperform. This is thanks to the company's recent releases, and as I mentioned above, Ternus' experience in developing Apple products could spur excitement among investors about what's next.

Investors may also like that Apple is less vulnerable to a potential slowdown in the AI build-out. Democrats may favor a slower pace when it comes to constructing new data centers, and they might support AI regulation too. All of this could weigh on Alphabet in the coming year.

So, though Alphabet and Apple are both great long-term stocks to own, Apple is the best AI stock in the "Magnificent Seven" to buy for 2027.

Adria Cimino has positions in Tesla. The Motley Fool has positions in and recommends Alphabet, Apple, and Tesla. The Motley Fool has a disclosure policy.