Key Points
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Alphabet stock is nearly 30% below its record high and trades for about 18 times forward earnings.
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Google Cloud revenue more than doubled last quarter, and the Gemini app has passed 1 billion users.
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Nvidia and Meta are also cheap on paper, but Alphabet offers a better mix of value and diversification.
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Many investors don’t believe the terms “Magnificent Seven” and “bargain stocks” usually belong in the same sentence. And it’s easy to see why. Over the past five years, the Magnificent Seven has gained more than 180% as a group, more than double the S&P 500’s total return over the same period. But I wouldn’t be so sure, especially after the recent AI-related sell-off in stocks, which pushed the Nasdaq Composite nearly 12% below its record and into correction territory. Now, there are several potential bargains in the elite group.
Here’s how the Magnificent Seven looks after the drop:
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
| Company (Ticker Symbol) |
% Below 52-Week High |
Forward P/E |
| Nvidia (NASDAQ: NVDA) |
19% |
20.9 |
| Meta Platforms (NASDAQ: META) |
21% |
20.7 |
| Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) |
28% |
17.9 |
| Microsoft (NASDAQ; MSFT) |
4% |
26.5 |
| Amazon (NASDAQ: AMZN) |
8% |
24.4 |
| Apple (NASDAQ: AAPL) |
2% |
36.1 |
| Tesla (NASDAQ: TSLA) |
28% |
205 |
Data source: yCharts. As of about 9:50 am ET on 11/6/2026.
Nvidia and Meta are trading at historically attractive valuations for sure. But I think Alphabet is the most attractive bargain of the group, and here’s why.
Image source: Getty Images.
The business is firing on all cylinders
Alphabet’s third-quarter revenue grew 25% to $127.6 billion. The standout was Google Cloud, where revenue more than doubled, up 103% to $30.7 billion, and operating income tripled to $11.1 billion. CEO Sundar Pichai also said the Gemini app has reached 1 billion users.
Profitability held up, too. Operating income grew 30% to $40.6 billion, a margin of about 32%, even as Alphabet ramped up its AI spending. And Google Cloud’s backlog of contracted future revenue reportedly stands at about $561 billion, which gives the segment years of visibility.
So why is the stock down about 30% from its high? Part of it is the earnings miss. Alphabet’s earnings per share fell to $2.12, below the nearly $3.00 analysts expected, and the stock fell almost 13% the next day. But most of the miss came from an $8.7 billion loss on its equity investments, which cut earnings by $0.55 per share and has nothing to do with how the business is running. There’s also search revenue, which grew 12%, but the slowing rate is concerning to investors who worry that Alphabet’s AI progress could ultimately hurt its core search advertising business.
Perhaps most significantly, Alphabet is spending heavily on its AI infrastructure. It expects capex of $200 billion this year and significantly more next year. And investors seem concerned about whether the company will achieve an acceptable ROI on its spending.
Why Alphabet over Nvidia?
Nvidia trades at about 21 times forward earnings, a remarkably low multiple, given that it grew revenue by 106% in the most recent quarter. But nearly all of Nvidia’s profits depend on companies continuing to spend heavily on AI data centers, and that’s exactly what the market is worried about right now.
Alphabet is in a different position. It’s one of the biggest buyers of AI infrastructure, but through Google Cloud, it’s also one of the biggest sellers. It also has Search and YouTube generating enormous profits. If AI spending slows, Alphabet’s spending falls, too. If it keeps accelerating, Google Cloud benefits. While an overall AI build-out slowdown could certainly hurt the company’s numbers, that’s a much more balanced risk profile.
Meta Platforms is also attractive at about 21 times forward earnings, and it’s a great business. But nearly all of its revenue comes from advertising, and it doesn’t have a cloud business selling AI capacity to others. Alphabet gets paid on both sides of the AI boom.
What could go wrong?
As mentioned, Alphabet’s spending is enormous. Capital expenditures more than doubled to $51.4 billion last quarter, and free cash flow was negative $9.1 billion. Alphabet didn’t buy back any stock in the third quarter, compared with $11.5 billion a year earlier, and it raised about $12.4 billion by selling new shares. There’s no guarantee those investments will start generating ample free cash flow.
The bottom line
Having said all that, I own Alphabet, and I think the correction has made it even more attractive. You’re getting one of the world’s most dominant businesses, growing the top line at 25% with a cloud segment that just doubled, for about 18 times forward earnings. I’m more likely to add to my position than sell.
Should you buy stock in Alphabet right now?
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Matt Frankel, CFP® has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
