How to invest in AI outside the Magnificent 7 stocks

This expert says there are other options for investors who think the Mag 7 shares are overvalued.

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Key points
  • The US Magnificent 7 stocks, including Nvidia, Apple, and Microsoft, have significantly contributed to the S&P 500's 70% rise since the AI boom following ChatGPT's launch, but other sectors and companies also offer promising AI investment opportunities.
  • Beyond the Mag 7, firms like Palantir Technologies have seen substantial growth, leveraging AI in data analytics for government and commercial clients, highlighting AI's expanding role in defence and business operations.
  • AI's impact extends to cybersecurity and robotics, with expected robust growth in global cybersecurity spending and increasing interest in robotics for automation, addressing challenges like labour shortages in developed economies.

Investing in the US Magnificent 7 stocks is an obvious way to gain exposure to the global artificial intelligence (AI) megatrend.

To recap, the Mag 7 shares are Nvidia Corp (NASDAQ: NVDA), Apple Inc (NASDAQ: AAPL), Microsoft Corp (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc Class A (NASDAQ: GOOGL), Alphabet Inc Class C (NASDAQ: GOOG),  Meta Platforms Inc (NASDAQ: META), and Tesla Inc (NASDAQ: TSLA).

Betashares investment strategist, Hugh Lam, says the Mag 7 stocks have delivered exceptional returns for investors since AI became a dominant market theme following the launch of ChatGPT in November 2022.

Since then, the S&P 500 Index (SP: INX) has gained 70% in value, with the Mag 7 responsible for more than half that, Lam said.

However, there are other options for investors who think the Mag 7 stocks are now overvalued.

Let's find out more.

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Image source: Getty Images

AI investment goes beyond the Mag 7 stocks

In an article, Lam said AI was here to stay, and there were many companies besides the Mag 7 set to benefit.

Lam commented:

From its potential to enable long-term productivity gains to becoming a geopolitical bargaining chip among the world's economic powerhouses, the market's fervour for AI looks here to stay.

However, the investment opportunity set is now broader than the Mag 7, with many other firms likely to thrive as AI technologies proliferate and data centre capacity grows.

Lam points out that the Mag 7 are critical in the AI infrastructure build-out, whilst other companies are using AI to enhance their services.

Examples include Palantir Technologies Inc (NASDAQ: PLTR), a US-based AI and defence software company specialising in data analytics for government and defence industry customers.

The Palantir share price has rocketed 115% in 2025 amid its software systems being adopted in US military operations and businesses such as Walmart Inc (NYSE: WMT) and Airbus SE (ETR: AIR).

Cybersecurity and robotics

Lam said the benefits of AI are now being seen in adjacent sectors to information technology, such as cybersecurity and robotics.

The investment strategist said:

… AI is reshaping the cybersecurity industry, particularly as geopolitical tensions continue to simmer and national self-sufficiency needs rise.

Against this backdrop, governments, businesses and individuals are all becoming more proactive in protecting their data.

Global cybersecurity spending is expected to see sustained growth of double-digit rates, reaching US$377 billion by 2028, according to the International Data Corporation.

This amount is not only large but also highly defensible in nature, with Chief Information Officers surveyed by Morgan Stanley viewing security as the category least likely to get cut in an economic downturn.

Lam says robotics has become a key theme in 2025, describing it as Nvidia's next biggest market for potential growth.

While still in its infancy, Betashares sees robotics becoming a bigger and more recognised investment exposure over time as developed market economies seek automation as a critical solution to counter structural macro issues including labour shortages and falling population growth rates.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, Tesla, and Walmart. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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