Alphabet is the best “Magnificent 7” stock, this investor says

Newman Group senior wealth advisor and portfolio manager Greg Newman says Alphabet (Alphabet Stock Quote, Chart, News, Analysts, Financials NASDAQ:GOOGL) offers one of the most attractive risk-reward opportunities among the Magnificent Seven technology stocks.

Speaking on BNN Bloomberg’s Market Call on Oct. 15, Newman said Alphabet has multiple ways to benefit from AI, supported by its search business, cloud infrastructure, Gemini AI models and proprietary TPU chips.

“They’ve got Gemini. They’ve got the TPU chips. They’ve got cloud. They’ve got search. So they’ve got multiple ways to win”

The investor acknowledged concerns about rising capital spending, potential disruption to Google Search and ongoing antitrust scrutiny, but said recent results support the investment case.

Newman noted that Alphabet’s cloud business delivered strong growth last quarter, while search continued to expand despite fears that AI would undermine its core business.

“The fact is that AI is not cannibalizing search. It’s actually increasing queries,” Newman said.

He pointed out that cloud revenue grew 82%, while backlog reached US$514-billion.

Newman said Alphabet’s integrated AI platform gives it an advantage over companies with more limited exposure to the technology.

“They’ve got Gemini. They’ve got the TPU chips. They’ve got cloud. They’ve got search. So they’ve got multiple ways to win,” he said.

Alphabet is planning capital spending of US$195-billion to US$205-billion this year, reflecting continued investment in AI infrastructure.

Newman said management has indicated it will keep investing as long as returns remain attractive.

Despite the spending, he said Alphabet’s valuation remains reasonable relative to its growth outlook.

Newman noted that the stock trades at about 22 times earnings while growing around 19%, making its price-to-growth relationship attractive.

“I see here a clear AI payoff,” he said.

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