Veteran fund manager picks best Mag 7 stock for 2026

Last week’s tech net enactment investors’ attraction backmost connected AI spending and whether it’s really paying off.

One megacap stands out, surging astir 10% implicit the past 5 trading days, the champion five-day show among the Magnificent 7 stocks.

That’s Alphabet. The banal is up 22% twelvemonth to day arsenic of writing, besides the strongest show successful the Mag 7 group.

Magnificent 7 banal year-to-date show arsenic of May 4, 2026:

• Alphabet (GOOGL) +22.44%

• Amazon (AMZN) +17.86%

• Nvidia (NVDA) +6.42%

• Apple (AAPL) +1.83%

• Meta Platforms (META) -7.53%

• Tesla (TSLA) -12.72%

• Microsoft (MSFT) -14.47%

Here’s what a seasoned capitalist thinks could beryllium adjacent for Alphabet stock.

Alphabet stands retired arsenic AI spending delivers returns

Veteran tech capitalist Dan Niles had already picked Alphabet arsenic his apical semipermanent prime heading into earnings.

“In previewing the Mag 7 results past Sunday, I wrote astir my concerns fixed the ample rally coming into earnings, but that Google was my favourite long-term,” Niles wrote successful an X station published connected May 3. He is the laminitis of Niles Investment Management.

“In looking astatine the results, Google did successful information execute the champion and gained 12% past week portion the S&P gained 1% and the different 4 Mag7 names that reported declined 2% connected average.”

Related: Cathie Wood buys $28.7 cardinal of tumbling megacap stock

The beardown banal absorption came aft a coagulated net report.

The Google genitor reported first-quarter results connected April 29, with net per stock of $5.11, good supra expert estimates of $2.62. Revenue roseate 20% from a twelvemonth earlier to $109.9 billion, topping expectations of $106.79 billion.

Growth was driven successful portion by the cloud. Google Cloud generated $20.02 cardinal successful revenue, up of the $18.05 cardinal analysts had expected.

“Our endeavor AI solutions person go our superior maturation operator for unreality for the archetypal clip successful Q1,” Alphabet CEO Sundar Pichaisaid successful the net call.

The institution is besides doubling down connected spending. Alphabet raised its 2026 superior expenditure outlook to a scope of $180 cardinal to $190 billion, up from its anterior $175 cardinal to $185 billion. CFO Anat Ashkenazi said 2027 spending is expected to “significantly increase” from 2026.

That operation of rising concern and accelerating maturation is what investors are rewarding, Niles said.

“Estimates for AI capex maturation for 2026 for the 5 biggest spenders, which started the twelvemonth adjacent to 30%, which moved to 60% station Q4 results, are present astatine 70% pursuing the guidance this past week connected net results.”

He added that markets are present focused connected ROIC (return connected invested capital), not conscionable spending.