Investors are rushing to buy artificial intelligence (AI) stocks because of the technology’s potential to revolutionize many industries — and our daily routines. Companies that either offer AI services to others or use AI themselves may see their revenues decline in the coming years, and if you invest in them today, you could benefit.
There are so many AI stocks out there that you might struggle to pick just one, and the good news is that you don’t have to — there are likely to be many companies down the road. AI will become the winner. But today, one particular player represents a generational investment opportunity. The company forms part of a group of industry leaders dubbed the “Magnificent Seven” after 1960 Westerns.
These stocks have thrived in recent years thanks to their earnings growth, their investments in new technologies such as AI, and their prospects for future growth. But one in particular – a market giant with a strong competitive advantage – remains surprisingly cheap, making it a fantastic buy right now. Let’s find out more.
Image source: Getty Images.
The Magnificent Seven includes companies that are known to power today’s economy, and as a result, companies that hold top positions in the S&P 500 and Nasdaq.
They are:
the alphabet (GOOG 0.82%) (GOOGL 0.93%)the parent of the top search engine Google.
Amazona leader in e-commerce and cloud computing.
appleManufacturer of leading devices including iPhone and Mac.
Meta platformsA collection of Facebook parenting and social media apps.
Microsofta global software giant.
Nvidiathe world’s largest seller of AI chips.
Teslaa leading manufacturer of electric vehicles.
Today, one stands out for its massive moat as well as its ability to leverage AI and the fact that it’s trading for a song. I am talking about the alphabet. The stock is up more than 50% over the past year, and it still trades for just 20x forward earnings estimates, up from 30 nearly two years ago.
A new phase of development is ahead.
The stock may not stay cheap for long, though, as Alphabet is likely entering a new phase of growth — driven by AI. And it should build on the solid foundation the company has laid over the years, growing billions of dollars in revenue and establishing a secure moat.
GOOG Net Income (annual) data via YCharts
The moat, or competitive advantage, is Alphabet’s brand strength in the search market — “Googling” things has become part of people’s routine. Google Search has consistently captured more than 90% of the global search market, and given its already impressive market position and Alphabet’s investment in AI, that’s unlikely to change.
So, how is AI helping Alphabet maintain its leadership? The company recently launched Gemini, its most powerful AI model to date, and the Gemini update — and Alphabet is using its AI platform for everything from cloud services to search.
AI is helping search produce better results than ever before, adding new elements like summaries and links that offer different perspectives on a topic. And AI is helping advertisers create their campaigns seamlessly. These two points are key because they strengthen the case for advertisers to keep coming back to Alphabet — and Google ads make up the bulk of Alphabet’s revenue.
Google Cloud sales increase
This hot technology should also help Alphabet in small businesses but with a greater speed and significant growth potential. I am talking about Google Cloud. A business may have a lower market share than a competitor. Amazonof Amazon Web Services, but revenue growth has been high in recent times. In the most recent quarter, Google Cloud revenue grew 25% while AWS revenue grew 13%.
Alphabet said its AI expertise helped it expand its cloud work with several top companies in the quarter, including McDonald’s And Verizon. The cloud offers business customers a variety of AI powers — from the Vertex AI platform to a coding companion for training and deploying AI models and hardware for AI workloads. And these are just a few examples.
We’re in the early days of AI development, with some analysts predicting the market will reach over $1 trillion by 2030. Alphabet, already a powerhouse in its market, is well-positioned to take advantage. Revolution — and that makes Alphabet, at its cost, a generational investment opportunity.
John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Randy Zuckerberg, former director of market development and spokeswoman for Facebook and sister of MetaPlatforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an Alphabet executive, 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, MetaPlatforms, 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.