Why a top tech investor says Alphabet is the best Mag 7 stock to own for the next year

• Alphabet stock ha surged this week on hype over the Google parent’s growing AI dominance.

• Investor Gene Munster thinks recent developments make Alphabet the top Magnificent Seven stock to own.

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If you had to pick one stock from a group of seven that are propping up the whole market, which would you choose?

Gene Munster thinks the answer should be Alphabet, at least for the next year.

The managing partner at Deepwater Asset Manager recently revealed why Google’s parent company is his top pick among the group of tech titans.

Munster thinks power dynamics in Silicon Valley are shifting as Google leaves no room for doubt that it’s among the most dominant names in AI tech.

The fund manager’s bullish thesis centers on Google’s recent progress in AI. Alphabet stock rose on Tuesday on news that Google’s Tensor Processing Units could power Meta Platforms’ data centers as soon as 2027.

As Google stock rises and Nvidia falls, Munster sees this as highly bullish for Alphabet stock in both the long and short term. He noted the common concern that Google could not compete in the generative AI market, a theory that he thinks the company has disproven with its recent progress.

“This is showing that they, in fact, have the chops to compete toe to toe from a large language model perspective, against OpenAI. It is encouraging for investors that the company’s culture has been reignited to compete,” Munster told CNBC.

He added that he sees the chatbot market as a significant opportunity for Google, as currently only about 20% of the platform’s user base engages with its Gemini AI tool frequently. Google’s recent updates to its AI platform have won high praise from tech leaders such as Salesforce CEO Marc Benioff, who recently touted it as being superior to ChatGPT.

Google stock is trading at 28 times forward 12-month earnings. As Munster noted, that’s in line with the rest of the Magnificent Seven, but in his view, Google’s new position as a competitor in both the chip and AI chatbot spaces positions it well to justify an even higher valuation multiple.

“If you think about Google’s distribution, it’s just habitual,” Munster said. “At the end of the day, there’s two and a half billion people who use Google search daily, and that compares to my estimates of about 500 million daily chat GPT users.”

As he sees it, Google’s edge has always been in its distribution and power to reach more users than any other platform, even as ChatGPT has disrupted the digital search ecosystem.

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