This Artificial Intelligence (AI) “Magnificent Seven” Stock Could be a Once-in-a-Generation Investment Opportunity … – The Motley Fool

author
4 minutes, 14 seconds Read

Investors have been rushing out to buy artificial intelligence (AI) stocks due to the technology’s potential to revolutionize so many industries — and our daily routines. Companies that either offer AI services to others or use AI themselves could see their revenue take off in the coming years, and if you invest in them today, you could benefit.

There are plenty of AI stocks out there so you may struggle to choose just one, and the good news is you don’t have to — it’s likely many companies will become AI winners down the road. But today, one particular player represents a once-in-a generation investment opportunity. This company happens to be part of a group of industry leaders dubbed the “Magnificent Seven” after the 1960 Western.

These stocks have advanced in recent years thanks to their earnings growth, their investment in new technologies such as AI, and their future growth prospects. But one in particular — a market giant with an enormous competitive advantage — remains surprisingly cheap, making it a fantastic buy right now. Let’s find out more.

An investor smiles while working on a laptop.

Image source: Getty Images.

The Magnificent Seven include companies known for powering today’s economy, and as a result, the companies hold top positions in the S&P 500 and the Nasdaq.

They are:

Alphabet (GOOG 0.82%) (GOOGL 0.93%), the parent of top search engine Google.

Amazon, a leader in e-commerce and cloud computing.

Apple, maker of leading devices including the iPhone and Mac.

Meta Platforms, the parent of Facebook and a suite of social media apps.

Microsoft, a global software giant.

Nvidia, the world’s top seller of AI chips.

Tesla, the leading electric vehicle maker.

Today, one stands out for its potential to benefit from AI along with its terrific moat and the fact that it’s trading for a song. I’m talking about Alphabet. The stock has climbed more than 50% over the past year, and it still trades for only 20x forward earnings estimates, down from more than 30 about two years ago.

A new phase of growth ahead

The stock may not stay this cheap for long though as Alphabet potentially enters a new phase of growth — driven by AI. And this should build on the solid foundation the company has put into place over the years, growing earnings into the billions of dollars and establishing a secure moat.

GOOG Net Income (Annual) Chart

GOOG Net Income (Annual) data by YCharts

The moat, or competitive advantage, is Alphabet’s brand strength in the search market — “Googling” things has become part of people’s routines. Google Search has steadily held more than 90% of the global search market, and due to this already impressive market position and Alphabet’s investment in AI, that’s unlikely to change.

So, how is AI helping Alphabet keep its leadership? The company recently launched Gemini, its most powerful AI model yet, and the Gemini update — and Alphabet is using its AI platform across its businesses from cloud services to search.

AI is helping search to produce better results than ever, adding new elements such as summaries and links that offer various perspectives on the subject. And AI also is helping advertisers seamlessly create their campaigns. These two points are key because they strengthen the case for advertisers to keep coming back to Alphabet — and Google ads make up the lion’s share of Alphabet’s revenue.

Google Cloud’s sales growth

This hot technology also should help Alphabet in a smaller business but one with great momentum and significant growth potential. I’m talking about Google Cloud. The business may hold less market share than rival Amazon‘s Amazon Web Services, but the revenue growth rate has been higher in recent times. In the most recent quarter, Google Cloud revenue jumped 25% while AWS revenue increased 13%.

Alphabet said that its AI expertise helped it to expand its cloud work with many top companies in the quarter including McDonald’s and Verizon. The cloud business offers customers a variety of AI strengths — from the Vertex AI Platform to train and deploy AI models to a coding companion and hardware for AI workloads. And these are just a few examples.

We’re in the early days of AI growth, with some analysts predicting the market will reach more than $1 trillion by 2030. Alphabet, already a powerhouse in its market, is well positioned to benefit from this once-in-a-generation technological revolution — and that makes Alphabet, at its price today, a once-in-a-generation investment opportunity.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Verizon Communications and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

This post was originally published on this site

Similar Posts