Alphabet Leaps Ahead as Top Pick Among Magnificent Seven Stocks

The Magnificent Seven stock to watch for next week is Alphabet (GOOGL) according to TradingKey. With diverse positions, Alphabet's AI exposure compared to Nvidia's pure growth leadership makes it a strong choice. Alphabet reported revenue of $119.8 billion in the second quarter, up 24% year over year, with Google Services generating $94.5 billion. Search revenue rose 17%, and Google Cloud revenue jumped 82%. Operating income increased by 30%, and the operating margin stood at 34%

Alphabet's AI exposure is broad and already visible through its cloud and search services as well as its TPU ecosystem. The main risk is heavy capital expenditure and regulation. TradingKey considers Alphabet to have the strongest balance of growth and quality of earnings with an AI exposure compared to Nvidia, which is the pure AI growth leader.

Nvidia (NVDA) maintains its position as the AI stock to watch due to its dominant AI position. Revenue for the second quarter was reported at $96.2 billion, up 106% year over year. Data Center revenue rose 117%, and gross margin remained in the 75% range. Management guided Q3 revenue to approximately $108 billion and targeted 70% growth in fiscal 2028.

Meta (META) is showing AI's potential to enhance its advertising business, with a 28% boost in Q2 revenue from $60.8 billion. However, costs are rising, forcing margins to contract to 31%. The main challenge remains whether the gains from AI-based advertising will be better than the costs of building and maintaining the necessary AI advertising infrastructure.