The Only Artificial Intelligence (AI) Stock in the "Magnificent Seven" That's Worth Buying After the Correction

Key Points

Alphabet competes both on the software side of the industry with Google Gemini and on the hardware side with its TPU.

The company continues to have absolutely stellar financials.

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With the recent pullback in artificial intelligence (AI) stocks, it's beginning to look as if the hype behind the technology is beginning to fade.

That's bad news for smaller start-ups in the space that are still reliant on large amounts of investor dollars. However, it's great news for investors and for the larger companies involved in AI.

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Investors benefit when AI stocks fall to a more reasonable level. And for larger companies, like Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), anything that pushes smaller competitors out can be a good thing.

Alphabet is a giant and it's stock has fallen over the past month. I think it's the only AI stock in the "Magnificent Seven" that's worth buying right now.

Spelling it out

Alphabet is the parent company of Google after all, and I'm willing to bet you've interacted with that website recently.

It's also been far and away the most successful of the Magnificent Seven in developing its own AI technology. Google Gemini has been steadily absorbing market share in the enterprise large language model (LLM) market since 2023.

Back in 2023, OpenAI, the company behind ChatGPT, had a 50% share in that market. Today, its share has fallen to an estimated 27%, while Google's share has risen from 7% to 21% over the same time frame. And Google is set to overtake ChatGPT this year if last year's trend continues.

Meanwhile, Alphabet's Magnificent Seven peer Meta Platforms has seen its share of the enterprise LLM market fall from 16% in 2023 to 8% by the end of 2025. What's more, the current market leader in the enterprise LLM space, Anthropic, has an estimated 40% market share, and it will be expanding its use of Alphabet's hardware moving forward.

I'll also note that another Magnificent Seven peer, Apple, partnered with Alphabet earlier this year to use Google Gemini's model to develop its own AI products.

So, Alphabet is already beating one of its peers in AI software and has another one of the Magnificent Seven reliant on its software for its own AI. Now, on to how it's dealing with the others.

Everything lines up

Alphabet's Tensor Processing Unit (TPU), co-developed with Broadcom, represents a serious competitor to Magnificent Seven peer Nvidia's graphics processing unit (GPU).

Note that all the other Magnificent Seven stocks use Nvidia hardware to run their AI to some degree, including Amazon and Microsoft, which both use Nvidia GPUs extensively.

While they are stuck buying all their hardware from Nvidia, Alphabet is shifting toward using its own, and some other AI companies have begun using the TPU as well. Anthropic is planning to spend tens of billions of dollars this year to add 1 gigawatt of TPU chips to its computational capacity.

So, with the exception of Tesla and Netflix, Alphabet either has a competitor to each Magnificent Seven company's AI product (be it hardware or software), or the company is using Google AI for its own products, like Apple does.

Google has basically set itself up as the kingpin of the AI industry. And unlike AI start-ups like Anthropic or OpenAI, it has plenty of other revenue streams aside from AI, and it's been a long time since Alphabet has been entirely dependent on investor dollars, so a drop in its stock price doesn't hurt the company.

For 2025, Alphabet saw its revenue climb 15% over 2024 to exceed $400 billion for the first time. The company also saw its diluted earnings per share (EPS) shoot up 34% over the same time frame. Alphabet also runs a net profit margin of 32.8%, and it has a very healthy debt-to-equity ratio of 0.14.

That all makes Alphabet the standout stock among the Magnificent Seven as far as AI goes.

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James Hires has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla and is short shares of Apple. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.