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

Alphabet outperformed its 'Magnificent Seven' peers in 2025 with a 64% return—about 33 percentage points ahead of Nvidia—yet still trades at the group's second-lowest trailing P/E of 30.6. The rally has been driven by a reacceleration in Search paid clicks (from 2% early in the year to 4% in Q2 and 7% in Q3) after Google rolled out AI Mode and AI Overviews and by the strong benchmarking performance of Gemini 3, prompting renewed investor interest including purchases by Berkshire Hathaway. With vertically integrated strengths—years of AI research, proprietary TPUs, accelerating Google Cloud adoption and expanding Waymo rides (1M/month in spring; 14M rides in 2025 with a 20-city rollout planned in 2026)—Alphabet has multiple levers to sustain growth, suggesting potential further upside despite still-modest relative valuation.

Analysis

Alphabet outperformed its Magnificent Seven peers in 2025 with a 64% gain, beating second-place Nvidia by ~33 percentage points, yet it still trades at the group's second-lowest trailing P/E of 30.6. The stock began the year as the cheapest in the cohort after a period when its P/E briefly touched the high teens, reflecting investor concern about AI-driven Search disruption.

The operational turnaround was driven by Search paid-click reacceleration from 2% early in the year to 4% in Q2 and 7% in Q3 following the May rollout of AI Mode and earlier AI Overviews, and by the November launch of Gemini 3, which the article says topped industry benchmarks versus the latest ChatGPT. The report notes renewed institutional interest, citing a Berkshire Hathaway purchase, and a Sam Altman “code red” reaction at OpenAI as indicative of competitive pressure.

Structural advantages cited include a long history of AI research, in-house TPUs used to train Gemini, accelerating Google Cloud adoption, and Waymo scaling to ~1 million monthly rides in spring and ~14 million rides in 2025 with a 20-city expansion planned in 2026. These multiple monetization vectors (Search, Cloud, Waymo, YouTube, subscriptions) support the thesis that Alphabet could sustain outperformance into 2026, albeit contingent on execution and sustained ad demand.

Key Decisions for Investors

• Investors should consider adding or increasing exposure to Alphabet to gain AI upside given Gemini 3 leadership and reaccelerating Search paid-click growth, while sizing positions to reflect execution risk
• Monitor near-term, company-level indicators closely — sustained Search paid-click growth (maintaining or exceeding the recent 4%–7% trajectory), Google Cloud adoption metrics including TPU usage, and Waymo ride growth and city rollouts — and reassess if these metrics stall
• Given the stock’s sizeable 2025 rally but still-modest trailing P/E of 30.6 versus peers, use a phased entry or trim into strength to manage valuation risk and preserve capital for potential 2026 catalysts