Why the Best-Performing "Magnificent Seven" Stock of 2025 Is Still a Buy for 2026

Core Viewpoint - Alphabet has outperformed its peers in the "Magnificent Seven" with a 64% return in 2025, significantly surpassing Nvidia by 33 percentage points and other competitors by over 50 points, indicating strong market performance and potential for continued growth into 2026 [3][21]. Financial Performance - Alphabet's current market capitalization stands at $3.7 trillion, with a current stock price of $309.22 and a price-to-earnings (P/E) ratio of 30.6, which is the second-lowest among the Magnificent Seven [4][6]. - The company began the year as the cheapest stock in the group, reflecting market fears regarding generative AI, but has since shown significant recovery and growth [5][21]. Search and AI Developments - Concerns about AI chatbots disrupting Google Search were prevalent at the beginning of the year, with paid click growth slowing to 2% in Q1. However, growth reaccelerated to 4% in Q2 and further to 7% in Q3, indicating a positive turnaround [8][9]. - The introduction of AI Mode in May and the launch of Gemini 3, a new large language model, have significantly enhanced user engagement and search capabilities, allowing Alphabet to regain its competitive edge in AI [11][12][16]. Competitive Positioning - Alphabet has a long history of AI research and has developed proprietary AI chips, which provide a competitive advantage over rivals like OpenAI. This vertical integration allows Alphabet to leverage its extensive experience and resources in AI development [14][15][17]. - The company is positioned to maintain its lead in the AI race, with significant financial resources and advancements in proprietary technology [17][18]. Future Growth Opportunities - Alphabet's cloud business is accelerating, with many private AI labs utilizing its proprietary TPU technology, which could become a significant profit center in the future [18]. - The self-driving unit, Waymo, has shown substantial growth, reaching over 14 million rides in 2025 and expanding its services, which could contribute to Alphabet's revenue streams in the coming years [19][20].