This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
The "Magnificent Seven" is a group of technology stocks that includes Nvidia, Microsoft, Apple, Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), Meta Platforms, and Tesla. Grouped together because they play an outsized role in the tech sector and in shaping the broader market, this basket of stocks has absolutely crushed broader-market indexes over the last five years. In fact, only Amazon has underperformed the S&P 500 over the stretch.
Given their individual competitive advantages and industry-shaping capabilities, there's a good chance that this group of stocks will continue to outperform the market -- but it's also virtually certain that some of these stocks will significantly outperform their peers. With that in mind, two Motley Fool contributors think that the two companies below will be the best-performing Magnificent Seven stocks over the next five years.
Jennifer Saibil (Amazon): Amazon has a few advantages over some of the other "Magnificent Seven" stocks, which makes it more likely that it will outdo them over the next few years and end up even more valuable. Let's go through them.
At today's prices, Amazon stock isn't expensive relative to its historical norms. It trades at a price-to-earnings (P/E) ratio of around 35, near its lowest value in a decade, which gives it more room to expand. It's easy to see how Amazon stock could rise in value over the next few years and make it the most -- or nearly the most -- valuable company in the world.
Keith Noonan (Alphabet): Alphabet has continued to serve up impressive business results, but its share price has actually fallen roughly 6% this year. Concerns that antitrust suits and investigations could result in the business being broken up have helped to dampen enthusiasm for the stock -- but I think that it stands out as one of the most promising investment opportunities in the Magnificent Seven.
While a potential breakup of the business could wind up creating some near-term valuation volatility, the individual units under the company's corporate umbrella continue to look very strong. It's also possible that businesses that would be spun off would wind up actually receiving higher valuations as stand-alones -- leaving the door open for Alphabet shareholders to see beneficial outcomes even if regulators disrupt the company's current structure.
Like other members of the Magnificent Seven, Alphabet is making big investments in artificial intelligence, but its potential to score big wins appears to be underappreciated compared to other members of the cohort. In addition to AI growth opportunities in digital ads and software, Alphabet's increased focus on designing and utilizing its own AI chips could help power growth for its cloud infrastructure business.
OpenAI recently announced that it was renting processing use of the company's tensor processing units (TPUs) through Google Cloud for AI inference applications, marking one of its first big pivots away from Nvidia's processors for this aspect of artificial intelligence. Given OpenAI's leading position in the generative AI space, it's not unreasonable to expect that some other big players in the category might follow suit.
Alphabet's long-term opportunity in the autonomous vehicle space also appears very far from being priced into its valuation. Through its Waymo subsidiary, the company currently occupies a leading position in the robotaxi and driverless-vehicle market. Waymo remains far ahead of Tesla in terms of vehicle-fleet size, trips, and road miles, and it's building a strong track record in vehicle safety. In addition to sales opportunities in the consumer robotaxi space, Waymo could allow Alphabet to tap into the massive market for self-driving vehicle delivery software.
With the company's core businesses looking undervalued and some potentially explosive growth opportunities taking shape, Alphabet could very well be the best-performing Magnificent Seven stock over the next five years.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors.
Jennifer Saibil has positions in Apple. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool 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.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
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