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

• Alphabet has outperformed the different "Magnificent Seven" stocks importantly this twelvemonth with a 64% gain.

• Yet, adjacent today, it's the second-cheapest banal among the group.

• On the backmost of its improved AI offerings, Alphabet could person different twelvemonth of outperformance successful 2026.

• 10 stocks we similar amended than Alphabet ›

While the marketplace is connected gait for a beardown 2025, astir of the stocks successful the "Magnificent Seven" simply had good, not fantastic, years. But 1 Magnificent Seven banal intelligibly took the crown successful 2025: Google genitor Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).

As you tin see, Alphabet's 64% instrumentality trounced the remainder of the Magnificent Seven, beating 2025's second-best performer, Nvidia (NASDAQ: NVDA), by a whopping 33 percent points and astir of the others successful the radical by much than 50 points.

Here's however Alphabet did it and wherefore the rally whitethorn precise good proceed into 2026.

Coming into the year, Alphabet had been a notable laggard, with its valuation reflecting sizeable fear, uncertainty, and uncertainty successful the property of generative artificial quality (AI). As a result, Alphabet began the twelvemonth astatine the lowest valuation of the group. At 1 point, its price-to-earnings (P/E) ratio adjacent touched the precocious teens -- beneath the mean valuation of the S&P 500.

Yet, arsenic you tin see, adjacent with this year's immense outperformance, Alphabet retains the second-lowest P/E ratio of the radical astatine 30.6 times trailing earnings, hardly beating retired Meta Platforms.

The superior interest entering the twelvemonth was that AI chatbots mightiness yet disrupt Google Search, which is inactive Alphabet's largest nett center. It's besides existent that, aboriginal successful the year, Google Search showed a concerning deceleration successful paid clicks. Yes, determination was inactive growth, but by the archetypal quarter, paid click maturation had fallen to conscionable 2%, with concerns that it mightiness yet spell negative.

However, connected its second-quarter earnings, Alphabet began to beryllium that communicative wrong, arsenic Search paid clicks reaccelerated to 4% growth. That mightiness person been erstwhile Warren Buffett oregon his lieutenants decided to bargain Alphabet banal for the Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) portfolio. Whatever the reason, the bargain proved prescient, arsenic Search paid click maturation accelerated yet again successful the 3rd 4th to 7%.

It wasn't conscionable a substance of luck that Alphabet was capable to reaccelerate Search paid clicks. The reacceleration of Search happened conscionable aft Google introduced AI Mode successful May, giving Search users the enactment of a chatbot-like acquisition powered by Alphabet's ain homegrown ample connection models (LLMs). It appears the improvement, combined with 2024's instauration of AI Overviews, caused Search users to reengage.