IVV ETF has been a popular choice among investors seeking exposure to the roaring US stock market over the past three years.

IVV is now the third largest ASX ETF out of more than 400 on the market, with more than $11.67 billion invested in it.

However, last month, IVV ETF recorded the highest investment outflows, indicating an exodus amid the Iran war.

Aussie investors took $461 million out of the exchange-traded fund (ETF) in March, based on ASX data analysed by Betashares.

However, investors have not given up on US shares, with $232 million flowing into IVV ETF's currency-hedged counterpart in March.

That's the iShares S&P 500 AUD Hedged ETF (ASX: IHVV), which is up 1.62% to $62.68 per unit today.

This indicates investors still want US exposure but are mindful of the weaker USD against the stronger AUD today.

Stronger Aussie dollar weakens IVV ETF returns

The Australian dollar has risen almost 20% from just over 60 US cents 12 months ago to a three-year high of 70.8 US cents today.

As James Gruber, Equity Market Strategist at CommSec, explains:

When the Australian dollar strengthens, your international ETF returns shrink, and if the Australian dollar weakens, your returns improve.

To put that into perspective: last year, the S&P 500 delivered total returns of 17.88%, but IVV ETF investors received just 10.75%.

The US dollar has weakened due to expectations of interest rate cuts, concerns over the impact of tariffs, and geopolitical uncertainty.

Meanwhile, the AUD has strengthened given Australia has entered a tightening rate cycle, with two rate hikes so far in 2026.

There is also strong demand for our commodities, which foreign buyers purchase with Australian dollars, amid a new mining boom.

Investors prefer IHVV over IVV today because hedged ETFs reduce the impact of currency movements on investments. 

Gruber explained:

For example, you may invest in an ETF that tracks the S&P 500 index. If it is unhedged and if the Australian dollar strengthens after you buy it, your returns in AUD may drop, even if the underlying investments do well in their home currency. 

Conversely, if the Australian dollar declines, the value of an unhedged ETF may rise in AUD terms, assuming the underlying asset holds or increases in value.

Gruber points out that currency-hedged ETFs typically cost more than unhedged ETFs.

Case in point: IHVV has management fee of 0.1% while IVV has a fee of 0.03%.

US shares vs. ASX 200 in 2026

The S&P 500 has substantially outperformed the S&P/ASX 200 Index (ASX: XJO) over the past three years.

But change is afoot this year.

So far in 2026, the S&P 500 has lifted 0.6% while ASX 200 shares have increased 2.9%.

Gruber points out that a key difference between the two benchmark indices is their exposure to technology companies.

That's significant because a global tech wreck is underway, as investors fret over the impact of artificial intelligence (AI).

Illustrating the difference, the IVV ETF is 34% tech stocks, while the ASX 200 has just a 3% exposure to technology.

Gruber said:

… the S&P 500 leans heavily on technology stocks. 

If you add the likes of Amazon and Tesla – classified as consumer discretionary stocks in the S&P – and Meta and Alphabet – included in the communications sector – to the technology sector, then tech accounts for more than 40% of the S&P 500 index. 

The post Why ASX investors dumped IVV ETF last month appeared first on The Motley Fool Australia.

In Australia and globally, several powerful themes are driving investment. Electrification is reshaping energy systems, requiring significant spending on transmission infrastructure, renewable generation, and storage. At the same time, strong commodity prices are supporting mining companies, while large-scale infrastructure projects — including those linked to the Brisbane 2032 Olympics — are lifting activity domestically.

Against this backdrop, two ASX-listed companies, Wagners Holding Company Ltd (ASX: WGN) and NRW Holdings Ltd (ASX: NWH), have delivered standout share price performance over the past 12 months, rising over 157% and 94%, respectively.

But after such strong gains, are the fundamentals keeping pace?

Riding the infrastructure and construction wave

Wagners is a construction materials and infrastructure business with exposure to concrete, cement, composite materials, and aviation services. The company generates revenue by supplying essential inputs into infrastructure, civil construction, and mining projects — sectors that are currently benefiting from elevated investment levels.

Recent updates suggest Wagners has been experiencing strong trading momentum, supported by higher demand across its key divisions. In particular, infrastructure activity in Queensland and major project pipelines have been contributing to increased volumes and improved pricing outcomes.

The company has also continued to invest in its proprietary composite technologies, which offer lighter and more durable alternatives to traditional materials. This positions Wagners to benefit not only from near-term construction demand but also longer-term structural shifts in how infrastructure is built.

Looking ahead, the outlook appears supported by sustained infrastructure spending and population growth, particularly in regions such as southeast Queensland. If project activity continues to ramp up, Wagners could see further earnings growth, provided cost pressures remain controlled.

NRW Holdings: Leveraged to mining services growth

NRW Holdings operates as a mining services contractor, providing civil, mining, and drill and blast services to resource companies. Its revenue is largely tied to contract work across mine development, production, and infrastructure.

The company has benefited from strong commodity prices, which have left many miners with robust balance sheets and the ability to fund expansion projects and exploration programs. This has translated into a growing pipeline of work for contractors like NRW.

Recent results highlight solid profit growth and a healthy order book, with the company securing new contracts and maintaining strong utilisation across its fleet. Importantly, NRW's diversified exposure across commodities and clients helps mitigate reliance on any single project or resource.

The outlook remains favourable as mining investment continues, particularly in bulk commodities and critical minerals linked to the energy transition. As long as commodity markets remain supportive, demand for mining services is likely to stay elevated.

What could drive the next leg of growth?

Both ASX shares are benefiting from trends that appear durable rather than cyclical in nature.

Electrification requires significant capital investment in infrastructure. Mining companies are expanding to meet demand for key resources. And government-backed infrastructure pipelines remain strong.

However, after such significant share price appreciation, future returns may depend more heavily on continued earnings growth rather than multiple expansion.

For Wagners, this means maintaining margins while scaling production and delivering on project demand. For NRW, it comes down to converting its order book into sustained revenue and profit growth while managing costs.

If both companies can continue to grow revenue and earnings, maintain or expand margins, and avoid valuation compression, there is potential for further upside over time.

As always, the key will be execution.

The post 2 ASX shares booming on electrification and mining. Is there more upside ahead? appeared first on The Motley Fool Australia.

With more than $8 billion in assets under management, QUAL is currently the fifth most popular ASX ETF on our markets. It comes in behind the Vanguard Australian Shares Index ETF (ASX: VAS), the Vanguard MSCI Index International Shares ETF (ASX: VGS), the iShares S&P 500 ETF (ASX: IVV) and the BetaShares Australia 200 ETF (ASX: A200).

Unlike those four ETFs, though, QUAL isn't a market-wide index fund that blindly invests in companies according to their market capitalisation, with few other considerations.

Instead, it tracks an index that actively screens companies to identify their quality. These screens include factors like a stock's return on equity, earnings stability and financial leverage.

After applying these screens to a range of internationally listed shares, the VanEck International Quality ETF settles on a portfolio of around 300 different stocks, hailing from more than a dozen different countries. These countries range from Switzerland, Japan and the United Kingdom to China, Denmark and Ireland.

However, the vast majority of QUAL's portfolio is drawn from the United States of America, which commands more than three-quarters of this ETF's weighted holdings.

So, let's get into what you're actually buying when purchasing QUAL units in 2026.

QUAL: What's in this ASX ETF's box?

Here are the current top ten holdings of the VanEck International Quality ETF, as well as their respective weightings in the QUAL portfolio:

1. Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) at 5.67% of the total QUAL portfolio
2. Meta Platforms Inc (NASDAQ: META) at 5.02%
3. NVIDIA Corporation (NASDAQ: NVDA) at 4.64%
4. Apple Inc (NASDAQ: AAPL) at 4.62%
5. Microsoft Corporation (NASDAQ: MSFT) at 4.46%
6. Eli Lilly & Co (NYSE: LLY) at 3.44%
7. Visa Inc (NYSE: V) at 2.92%
8. ASML Holding N.V. (AMS: ASML) at 2.52%
9. Johnson & Johnson (NYSE: JNJ) at 1.86%
10. Walmart Inc (NYSE: WMT) at 1.77%

Some other significant QUAL holdings include Mastercard Inc (NYSE: MA), Netflix Inc (NASDAQ: NFLX), Costco Wholesale Corp (NASDAQ: COST) and Caterpillar Inc (NYSE: CAT).

Not only does this list reveal how dominant the US is in this ASX ETF, but it shows how similar its holdings are to a broad-market US index fund like the iShares S&P 500 ETF. We discussed that ETF just the other day, so check out how its holdings compare to QUAL's here.

This methodology seems to have worked quite well for the VanEck International Quality ETF, though. As of 31 December, QUAL units have returned an average of 14.8% per annum over the past ten years, and 22.85% per annum over the past three. It will be interesting to see if this performance keeps up in 2026.

This ASX ETF charges a management fee of 0.4% per annum.

The post Investing in the VanEck International Quality ETF (QUAL)? Here's what you're really buying appeared first on The Motley Fool Australia.

Only two Mag 7 shares delivered impressive capital growth, while the other five underperformed the major US indices.

Yep, they underperformed.

The health of the Mag 7 companies matters to Australian investors because we are heavily invested in them, whether we like it or not.

Got a superannuation fund? Chances are a chunk of your retirement savings are invested in these seven high-tech companies.

Own exchange-traded funds (ETFs) tracking the US or global markets?

You're definitely invested in the Mag 7 stocks.

The Mag 7's high market caps mean they dominate the S&P 500 Index (SP: .INX) and the Nasdaq Composite Index (NASDAQ: .IXIC).

Therefore, their performance has a direct impact on many Australians' investments.

Let's take a look at how the Magnificent 7 stocks performed in 2025, starting with the No. 1 riser.

And no, it's not the stock you think!

Magnificent Seven stocks in 2025

To set the scene for you, the S&P 500 rose 16.39% and the Nasdaq Composite lifted 20.36% last year. (Compare that to ASX shares here.)

Here's how the Magnificent Seven stocks compared to the broader market.

1. Alphabet Inc Class A (NASDAQ: GOOGL)

Both Class A and Alphabet Inc Class C (NASDAQ: GOOG) shares lifted 65% in 2025.

Class A stock closed at US$313 per share, and Class C shares closed at $313.80.

Nvidia Corp (NASDAQ: NVDA)

US stock market darling Nvidia still put in a good performance as it continues to leverage the artificial intelligence megatrend.

Stock in the US graphics and AI chip designer rose 39% to close at US$186.50 per share on 31 December.

In October, Nvidia became the first company in the world to reach a US$5 trillion market cap.

Investment platform Stake reports that Nvidia was one of the five most traded US stocks by Australian traders last year.

According to Stake's 2025 Retail Investor Report Card:

It beat revenue estimates every quarter in 2025 by an average of 8.9% and is on track to generate US$212B in FY26.

Its earnings have become a global market catalyst: Nvidia's results serve as a directional signal for traders worldwide.

For Stake investors, the biggest 'buy-the-dip' moment came during the DeepSeek moment in January, when Nvidia lost US$260B in market cap but buy orders surged 460%.

Microsoft Corp (NASDAQ: MSFT)

The Microsoft stock price rose 15% to close 2025 at US$483.62 per share.

Meta Platforms Inc (NASDAQ: META) 

Meta Platforms shares rose 13% to finish the year at US$660.09.

Tesla Inc (NASDAQ: TSLA)

Stock in electric vehicle manufacturer Tesla rose 11% to US$449.72 per share.

Stake analysts said Tesla was the only Magnificent Seven stock not to set a new share price record in 2025.

Apple Inc (NASDAQ: AAPL) 

US technology stock Apple rose by 9% to close at US$271.86 per share on 31 December.

Amazon.com, Inc. (NASDAQ: AMZN) 

The Amazon share price inched 5% higher to close at US$230.82 on 31 December.

Interesting sidenote

My US Fool colleague Trevor Jennewine recently covered the third-quarter report from Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B).

The report showed that the 'Oracle of Omaha', who retired at the end of last year, bought Alphabet stock — the best performer of the Magnificent Seven in 2025 — and continued to sell down Apple — the second-worst performer of the group — during the third quarter.

Berkshire Hathaway purchased 17.8 million shares in Alphabet, which now accounts for 2% of the company's $267 billion portfolio of 41 stocks.

Berkshire sold 41.7 million Apple shares, and although the company remains Berkshire's largest holding at 21%, its position has reduced by 74% in just two years.

The post Here's how the US Magnificent Seven stocks performed in 2025 appeared first on The Motley Fool Australia.

• Washington H. Soul Pattinson and Co Ltd (ASX: SOL)
• REA Group Ltd (ASX: REA)
• MFF Capital Investments Ltd (ASX: MFF)
• Wesfarmers Ltd (ASX: WES)
• TechnologyOne Ltd (ASX: TNE)

My US picks were:

• Amazon.com Inc (NASDAQ: AMZN)
• Doulingo Inc (NASDAQ: DUOL)
• S&P Global Inc (NYSE: SPGI)
• Costco Wholesale Corp (NASDAQ: COST)
• Mastercard Inc (NYSE: MA)

Obviously, not much has changed in a week, and I would still love to own more of all ten of these companies in 12 months' time.

But we're not stopping wth those stocks. Today, let's discuss ten more stocks that I think anyone can buy today to start 2026 off on a strong note. We'll once again do five ASX shares and five US stocks.

5 top ASX shares to kick off 2026 with a bang

I love consumer staples companies, and Coles Group Ltd (ASX: COL) is one of my favourites here on the ASX. Coles is a strong dividend payer with a defensive and mature earnings base that can provide protection against both recessions and inflation. It will, in my view, be around for decades to come.

Telstra Group Ltd (ASX: TLS) is another veteran ASX stock I like for 2026. Its dominance of the defensive mobile and internet markets gives it a strong moat and, thus, a reliable dividend. This company's fully-franked payouts are historically some of the best on the ASX.

Turning to a faster-growing company now, Xero Ltd (ASX: XRO) is another top stock looking interesting as we start the new year. Xero has a remarkably sticky product in its cloud-based accounting software. Consumers seem willing to keep paying those monthly fees to use Xero's platform. The company's growth plans are very exciting too.

JB Hi-Fi Ltd (ASX: JBH) is our fourth pick of the day. JB has proven itself to be one of the ASX's best retailers, having savvily evolved from selling hi-fi products to becoming an all-out electronics and appliances retailer over the past two decades. Customers love JB's distinctive marketing tactics and innovative store layouts. With JB having a rare lacklustre year in 2025, this one is looking tempting as we start 2026.

Our final ASX stock worth discussing today is more left-field. It is the gold miner Newmont Corporation (ASX: NEM). Normally, I shy away from more speculative investments like Newmont. But Newmont can be viewed as an insurance policy of sorts. If 2026 produces geopolitical or economic uncertainty on the global stage, Newmont could benefit from a rush to the 'safe haven' of gold. If some experts are to be believed, it could have another bumper year in 2026.

5 top US stocks to check out too

When I named Mastercard as one of my top US picks last week, it was partly due to my conviction that contactless and electronic payments are in the middle of a powerful long-term tailwind. That's why I am also happy to own and spruik Mastercard's arch-rival Visa Inc (NYSE: V). Visa is the largest payments company in the world, and is an extraordinarily profitable stock. However, I think its best days lie ahead.

We can say the same for Magnificent Seven winner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL). Google-owner Alphabet owns several of the world's best businesses. These include Google Search, YouTube, Google Cloud, and AI-platform Gemini. I'm also excited about the company's self-driving division.

I would be happy to own Alphabet's Magnificent 7 sibling, Microsoft Corp (NASDAQ: MSFT), too. Buying Microsoft stock means buying a share in Windows, Office, Xbox, Teams, Activision Blizzard, LinkedIn, and many other leading digital products and services that Microsoft owns. I rest my case.

Netflix Inc (NASDAQ: NFLX) is another winner that I think will keep on winning. If Netflix manages to acquire the assets of Warner Bros Discovery Inc (NASDAQ: WBD) this year, it will own one of the most extensive and valuable collections of intellectual property on the planet. Even if it doesn't, Netflix owns a service that is well on its way to becoming an internationally recognised household essential.

Our final stock is a simple one that we all know and may love. McDonald's Corporation (NYSE: MCD) is one of the most resilient businesses in existence. Its brand is universally recognised, having transcended into popular culture decades ago. As an inflation and recession-resistant stock, I'd be happy to buy more McDonald's this January.

The post My 10 top stocks to buy to start the New Year off right appeared first on The Motley Fool Australia.

Like the internet was 30 years ago, artificial intelligence (AI) is the next major technological shift that will reshape the economy. That also makes it a generational opportunity for investors to accrue wealth by buying and patiently holding the right growth stocks. Research from Morgan Stanley projects that AI could deliver operating efficiencies worth as much as $40 trillion to the global economy over the long term. 

Investors don't need to gamble on unproven companies and excessively risky stocks for the chance to profit from this trend. Simply sticking with leading tech stocks could help you achieve market-beating returns. After all, it's the world's largest and most profitable companies that are doing much of the work involved in enabling the wider adoption of AI. To position your portfolio to profit from this opportunity, I suggest adding shares of these two tech titans that will likely still be leading their respective industries 20 years from now. 

Nvidia

For those seeking to profit from the AI trend over the past few years, Nvidia (NASDAQ: NVDA) has been one of the best stocks to own, and the company's innovation and financial fortitude should keep it in the driver's seat. Its high-end graphics processing units (GPUs) are used by all the leading cloud infrastructure providers, and those data center GPUs are sold out for the foreseeable future.

Nvidia's data center revenue surged by 66% year over year last quarter to $51 billion. This high-growth trajectory reflects a long-term transition from traditional computing that relies more on central processing units (CPUs) to accelerated computing that demands massive quantities of parallel processors such as GPUs.

The good news for investors buying Nvidia stock today is that this transition will unfold over many years. Capital spending on AI infrastructure is expected to grow from $600 billion in 2026 to at least $3 trillion by 2030. This massive buildout portends significant growth for Nvidia.

Nvidia will have to continue innovating to maintain its lead over other semiconductor companies that are designing chips to handle AI workloads. However, in recent years, it has accelerated its pace of innovation, moving to a cadence of introducing new and better GPU architectures annually. That continually pushes its chips' performance to new levels, and will make it difficult for competitors to keep up. It is already preparing to launch its Vera Rubin chips in 2026 -- those will deliver significant performance improvements over its current Blackwell generation.

Facilitating Nvidia's steady innovation is its financial fortitude. It's one of the most profitable companies in the world, with net profits of $99 billion over the last four reported quarters on $187 billion in revenue.

In a world where AI is increasingly driving everything, Nvidia looks likely to remain a solid investment for the next 20 years. It is investing in solutions that will underpin the future economy, such as robots, autonomous vehicles, and AI agents. Analysts expect the company to experience 37% annualized earnings growth over the next few years, pointing to substantial returns ahead for shareholders.

Alphabet

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) delivered market-beating returns for investors over the last decade, driven by strong growth in advertising through Google Search and YouTube. The stock climbed 700%, but the next decade could see more returns as demand for AI and cloud computing takes off.

The stock rocketed to new highs in 2025 as investors started to recognize Google as a leader in AI, but that was likely just the beginning. Google Gemini is one of the most capable AI models, and it's being layered into all of Alphabet's services, including enterprise tools in Google Cloud. Revenue from its cloud segment increased 34% year over year in the third quarter.

Alphabet just surpassed $100 billion in quarterly revenue for the first time, as AI features are driving Google Search usage higher. The Gemini app has over 650 million monthly active users, making it the second-most-used AI model behind ChatGPT.

The company is benefiting from profitable revenue streams across its diverse business lines, including online advertising, subscription services (e.g., YouTube TV and Google One), and cloud services. This will support the hiring of top AI engineers and an expanding base of data centers that will help it maintain its leadership in AI.

The company was on course to spend more than $91 billion on capital expenditures in 2025, and plans a significant increase from that in 2026. It can cover those outlays through its operating cash flow, which totaled $151 billion over the last four reported quarters. These investments are strengthening its competitive position, paving the way for compounding returns for investors over the long term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 AI stocks to buy in January and hold for 20 years appeared first on The Motley Fool Australia.

Over the last three years, artificial intelligence (AI) has become a theme so influential that the broader market seems to ebb and flow based on this singular narrative. The S&P 500 and Nasdaq Composite indices are both hovering near record highs, with megacap technology stocks being some of the largest contributors to the market's ongoing rally.

While just about every major investment fund on Wall Street can't seem to get enough of AI, Berkshire Hathaway's Warren Buffett -- who just retired as CEO -- has primarily stuck to his contrarian methods. Throughout the AI revolution, Berkshire has been a net seller of stocks -- hoarding cash on its balance sheet and collecting passive income through Treasury bills.

Last quarter, Berkshire finally put some of its excess capital to use and made a significant addition to its portfolio. Let's dig into some of the fund's moves in recent years and try to make sense of what drove these decisions. From there, we'll take a look at valuation and assess if now is a good opportunity to follow in Buffett's footsteps. 

No longer the apple of Buffett's eye

Berkshire Hathaway has long been a fan of consumer businesses and financial services. For decades, many of the firm's largest positions have included insurance companies and banks, as well as a mix of consumer staples and discretionary brands.

Back in 2016, Buffett made headlines following Berkshire's purchase of Apple (NASDAQ: AAPL) stock. Many investors viewed this as a rare instance of Buffett investing in the technology sector. However, given Apple's brand moat, consumer loyalty, robust hardware ecosystem, and steady cash flow generation, the company actually checks off many of Buffett's investment criteria.

A combination of meaningful price appreciation and subsequent buying over the last decade ultimately turned Apple into Berkshire's largest position. Throughout the AI revolution, however, Buffett has been trimming exposure to the iPhone maker.

Data Source: 13f.info

Since the end of 2023, Berkshire has reduced its exposure to Apple by roughly 73%. Many pundits on Wall Street have criticized Apple for being late to the AI market. While I personally agree, I do not think this necessarily played much of a role in Buffett's decision to sell the stock.

To me, the rationale behind these sales was more macro-oriented. Since October 2023, both the S&P 500 and Apple stock have risen by about 60% -- an abnormally high return in a rather short period. Buffett has always exercised prudent judgment. I think taking advantage of a frothy market and rotating capital into more passive vehicles seemed like a better deal in the eyes of Buffett.

Billionaires are plowing into Alphabet stock

For much of the AI revolution, companies such as Nvidia and Palantir Technologies have been the main attractions. When it comes to legacy internet companies, both Amazon and Microsoft have also become heavily featured in the broader AI discussion.

One company that has been relatively quiet for the last few years, however, is Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). For a while, the rise of large language models (LLMs) such as ChatGPT were viewed as a knockout punch for traditional search engines -- namely, Google.

But over the last few years, Alphabet quietly trudged along and built out its AI roadmap. Now, billionaires are finally catching on. During the third quarter, notable investors, including Stanley Druckenmiller, Israel Englander, Ken Griffin, Philippe Laffont, and now Warren Buffett, all poured into Alphabet stock.

Is Alphabet stock a good buy right now?

Alphabet currently boasts a forward price-to-earnings (P/E) multiple of 29. While the time to buy the stock at bargain prices may have passed, there are still plenty of upsides.

GOOGL PE Ratio (Forward) data by YCharts

Today, Alphabet has integrated its own LLM, Gemini, into core aspects of its business -- from an overhauled Google search landing page to the company's Android consumer electronics devices.

In addition, Alphabet has also invested heavily into its own hardware in the form of custom application-specific integrated circuits (ASICs) called Tensor Processing Units (TPUs) -- integrating this technology into its budding cloud computing platform. Most recently, Alphabet announced a $4.7 billion acquisition of Intersect -- a provider of clean energy power sources for data centers.

By vertically integrating all aspects of the AI value chain across its ecosystem, Alphabet is positioning itself to emerge as a durable leader of the next technological supercycle. Against this backdrop, I think Alphabet is poised for meaningful valuation expansion over the next several years and see the company as a compelling opportunity to buy and hold for patient investors with a long-term time horizon -- just like Berkshire Hathaway. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Berkshire is selling Apple stock and buying this other magnificent artificial intelligence (AI) stock instead appeared first on The Motley Fool Australia.

Artificial intelligence (AI) continues to be the biggest driving theme in the market today, and there is little reason to think that this won't continue. Demand for both AI infrastructure and services appears insatiable, and it still looks as if we're still in the very early innings of this trend.

Against this backdrop, let's look at the top two AI stocks to buy right now. 

1. Nvidia

Nvidia (NASDAQ: NVDA) is the king of AI infrastructure, and the company's recent acquisitions have made it even stronger. It's best known for its graphics processing units (GPUs), which provide the processing power for the majority of AI workloads. GPUs are particularly dominant in large language model (LLM) training, where the company's CUDA software platform adds to its wide moat. Nearly all foundational AI code was written on CUDA, and that code only works natively with Nvidia's chips.

With its recent acquisition of SchedMD, Nvidia has only expanded its software moat. SchedMD is the developer of Slurm, an open-source software platform that helps manage GPUs by determining which tasks they perform and when. With this acquisition, Nvidia now controls the primary orchestration platform for AI chips. While it says it will keep Slurm open-source, its control over the platform will allow it to more tightly integrate it with CUDA to offer an even more seamless experience.

Then, on Christmas Eve, the company acquired top talent from Groq and signed a licensing agreement with the company for its technology. The deal essentially gives Nvidia access to Groq's language processing units (LPUs), which are specialized chips designed specifically for AI inference. Demand for AI inference processing is eventually expected to become larger than demand for training, so this deal can be viewed as Nvidia playing both offense and defense to get ahead of that shift.

Overall, Nvidia remains the company best positioned to profit from the continued AI buildout, and its recent acquisitions only strengthen its position. The stock is also reasonably valued, trading at a forward price-to-earnings (P/E) ratio of about 25, based on analysts' estimates for its fiscal 2027, which will begin in late January 2026.

2. Alphabet

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) is arguably the best positioned AI company because it is the only one not reliant on Nvidia.

While other companies are working on designing their own custom AI accelerator chips, Alphabet's Tensor Processing Units (TPUs) are now in their seventh generation and have been battle-tested by running Google's workloads for more than a decade. Those years of experience aren't something that its competitors can easily emulate.

As such, the company enjoys a big structural cost advantage in both AI training (having trained its world-class AI model Gemini) and inference relative to companies that rely largely on Nvidia for chips. Its TPUs have proven so good that Anthropic signed a large deal with Alphabet to deploy TPUs to power its AI workloads. Morgan Stanley estimates that for every 500,000 TPUs that Alphabet rents out, it generates around $13 billion in revenue.

Alphabet's other advantage over its cloud computing competitors is that it owns a world-class LLM that rivals OpenAI's ChatGPT. First, this lets it capture more cloud computing revenue by offering its own model. Second, it can monetize its AI model more readily by integrating it into its products, including Google Search, its Android operating systems, YouTube, Google Maps, Gmail, and its workplace productivity tools. With lower costs for training and inference, as well as more platforms upon which it can deploy and monetize its models, Alphabet holds significant advantages over OpenAI and other LLM developers.

As the most vertically integrated AI company, Alphabet is in a strong position, and its advantages should only widen in the coming years. Meanwhile, the stock is attractively valued, trading at a forward P/E of 28. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post What are the 2 top artificial intelligence (AI) stocks to buy right now? appeared first on The Motley Fool Australia.

The "Magnificent Seven" grouping of stocks represents seven of the biggest and most influential companies in the world that make up roughly one-third of the market cap-weighted S&P 500. Its members have a significant impact on whether the overall stock market rises or falls in a given day, so they are closely watched by both analysts and retail investors.

In a series of articles, I've been looking at each of these companies to predict which is the best Magnificent Seven stock to buy for 2026. And while I'll reveal the full rankings later in this piece, it's time to unveil the legendary company that tops the rankings and appears to be in the best position as we head into the new year.

Let's pull the curtain back on my No. 1 pick: Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). 

About Alphabet stock

Alphabet is probably still better known as Google, and for good reason. Google has an unshakable lead in global internet search, with 89.9% of the market share. The search engine in second place, Bing, has just 4.2%. And Alphabet's Chrome browser is nearly as dominant with 71.2% of the market, topping second-place Safari with 14.3%.

This means that Alphabet is unquestionably the most consequential internet company in the world. And it gives it a massive advantage, both in selling advertising and pushing content to prime locations on the web.

Alphabet brought in $74.18 billion in revenue during the third quarter from advertising, which includes Google Search, its Google network, and YouTube. That's a 12.6% increase from a year ago, made possible by Alphabet's use of powerful AI tools. For instance, Alphabet uses AI to provide more relevant answers to search queries and also launched an AI Overviews feature that appears at the top of a search result. It also uses AI to optimize the creation and placement of advertising, and even has AI tools to help users answer their email.

In all, advertising made up 72% of Alphabet's $102.34 billion in revenue for the third quarter, helping it achieve an incredible $73.55 billion in free cash flow over the last 12 months.

Alphabet is making huge strides in cloud computing

As dynamic as Alphabet's advertising business is, I think the cloud computing opportunity is even greater. Google Cloud is only third by market share with 13%, trailing Amazon Web Services and Microsoft Azure, but it's seeing substantial growth. Google Cloud generated $15.15 billion in revenue in the third quarter, up 33% from a year ago. It was also responsible for $3.59 billion in operating income, up from $1.94 billion a year ago.

Finally, Alphabet has a big opportunity with its Tensor Processing Units (TPUs), which are its in-house alternative to Nvidia's vaunted (and expensive) graphics processing units (GPUs). Alphabet's TPUs aren't as versatile as GPUs, but they are effective in training its AI models. Now Alphabet is reportedly discussing a deal that would sell billions of TPUs to Meta Platforms and it has a deal with Anthropic, which announced it will expand its use of Google Cloud to include up to 1 million TPUs.

Coupled with Google's massive advertising business, the fast-growing cloud opportunity makes Alphabet even more formidable -- and attractive for investors as we head into 2026.

Why Alphabet is No. 1

Alphabet shares are up more than 60%, but the company is still reasonably priced. Its forward price-to-earnings ratio of 29.7 remains one of the lowest in the Magnificent Seven.

Revenue estimates for next year of $454.8 billion have climbed steadily over the last six months, as the market begins to realize the massive potential of Alphabet stock.

While this company may not be the flashiest in the Magnificent Seven -- I would give that crown to either Nvidia or Tesla -- I think it's a no-brainer for any investor to buy right now.

The list in review

Now we finally have the full list, in order:

• No. 1 Alphabet is the dominant internet company on the planet and is starting to market its alternative to Nvidia GPUs.
• No. 2 Nvidia is the largest company in the world by market capitalization and has taken the leading role in providing high-powered GPUs to data centers, powering the AI revolution.
• No. 3 Meta Platforms shifted its attention away from the metaverse and is now focused on developing "personal superintelligence" through AI.
• No. 4 Microsoft has powerful revenue streams through its cloud computing division and its profitable suite of software, including Word, Excel, and PowerPoint.
• No. 5 Tesla aims to make breathtaking advancements in autonomous driving, which, if successful, will enable hundreds of thousands of Teslas to be used as robotaxis.
• No. 6 Amazon is the globe's biggest provider of cloud computing, but is hampered by the comparatively low margins of its legacy e-commerce business.
• No. 7 Apple isn't monetizing AI like its Magnificent Seven peers, but it's developing advanced chips to run large AI models on its products.

You really can't go wrong with any of these companies. However, I believe Alphabet is the clear winner for investors seeking to purchase a Magnificent Seven stock for 2026.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Warren Buffett has never been one to push Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) into hot trends. He gave an excellent reason for that in his 1996 letter to shareholders: 

We are searching for operations that we believe are virtually certain to possess enormous competitive strength ten or twenty years from now. A fast-changing industry environment may offer the chance for huge wins, but it precludes the certainty we seek.

In other words, Buffett would rather be the tortoise than the hare. So, hot trends like internet stocks in 1996 or booming artificial intelligence (AI) companies today don't interest him too much as an investment manager.

Nonetheless, Buffett finds himself in charge of a stock portfolio where roughly 23% of the assets are invested in three companies that are heavily tied to AI -- among them, one of Berkshire's biggest equity purchases of the last few years. But all three have qualities that he generally seeks in investments -- and qualities that will surely set up his successor, Greg Abel, to deliver excellent returns for the next 10 or 20 years or more. 

1. Apple (20.5%)

Apple (NASDAQ: AAPL) has been the largest position in Berkshire Hathaway's equity portfolio since Buffett and his right-hand man, the late Charlie Munger, built up a massive stake in the company between 2016 and 2018. At this year's shareholder meeting, Buffett jokingly thanked Apple CEO Tim Cook for making Berkshire Hathaway shareholders more money than he ever has.

But Buffett has been selling shares of Apple since late 2023. There may be a few reasons for that. First, the stock's weight in the portfolio might have been too much, even for Buffett, who historically keeps a highly concentrated portfolio. At its peak, Apple accounted for about half of the portfolio's value. It remains Berkshire's largest marketable equity holding heading into 2026, based on the conglomerate's most recent SEC disclosures.

Second, Buffett saw what he viewed as an opportunity to take gains while corporate tax rates are low, as he expects that Congress will have to increase tax rates due to the federal government's massive deficits and debts. Lastly, Buffett assessed the valuation of Apple stock and deemed it to be well above its intrinsic value.

That last point is key. Apple hasn't benefited as much as other tech giants from the increase in AI spending on semiconductors, cloud computing infrastructure, and advanced software. It has continued to exhibit steady revenue and earnings growth, though, and its earnings per share have been further boosted by its massive share-repurchase program. But the stock now trades for a premium valuation of about 33 times forward earnings estimates, in line with other big AI stocks.

However, Apple will push its AI ambitions forward next year with the long-awaited release of a revamped Siri that will feature numerous new generative AI capabilities. The advanced AI assistant may spur a big upgrade cycle for the company's devices, pushing iPhone sales higher. Additionally, the introduction of more on-device AI capabilities could increase its high-margin services revenues significantly in the coming years. Based on those expectations, it may be worth paying a premium for Apple stock.

2. Alphabet (1.8%)

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) is the latest major addition to Berkshire Hathaway's portfolio. The conglomerate acquired 17.8 million shares during the third quarter, which are worth $5.6 billion as of this writing.

The stock has been on an incredible run since September, when a federal judge imposed remedies upon Alphabet that were much more lenient than expected following its conviction for maintaining an illegal monopoly in online search. Strong financial results and continued momentum for both its cloud computing business and its large language model (LLM) development have helped propel the stock materially higher.

Its cloud computing business has seen strong growth. Revenue climbed 33% last quarter, and its operating margin expanded to 24%, but there could be even more room for margins to expand as it scales. That's especially true given the momentum for its custom Tensor Processing Units (TPUs), which can offer its cloud computing clients a more cost-effective alternative to graphics processing units (GPUs) for AI training and inference. It has signed several big deals with major AI developers to use its TPUs, helping push its remaining performance obligations 46% higher year over year to $155 billion.

The core search business remains a cash cow despite the threat of AI chatbots taking market share away from Google. The company has effectively integrated AI into its search results through AI Overviews and AI Mode, resulting in an increase in search traffic without negatively impacting monetization. As a result, Google Search revenues continue to climb. And that may have been the key to Buffett's decision to invest in the company -- the "enormous competitive strength" of its core business.

As mentioned, Alphabet shares have climbed significantly in Q4, pushing their valuation to almost 30 times expected earnings. It's unclear if Buffett and his team will keep buying shares at that significantly higher valuation, but they could be worth it given the AI-driven momentum behind the company.

3. Amazon (0.7%)

Amazon (NASDAQ: AMZN) has been a small position in Berkshire Hathaway's marketable equity portfolio since 2019. Based on the size of the investment, many believe one of its other investment managers, Ted Weschler or Todd Combs, made the decision to buy it. The driving force behind Amazon's operations when Berkshire first acquired shares in 2019 was its cloud computing division, Amazon Web Services (AWS). That remains true today. 

AWS is the world's largest public cloud computing platform. Its revenue is more than double Google Cloud's, and its operating margin of 35% dwarfs it. Management notes its AI services on AWS are growing at a triple-digit percentage pace, and demand continues to outstrip its ability to add capacity despite three years straight of building as fast as possible.

Like Alphabet, Amazon's massive investment in cloud capacity to capitalize on the AI opportunity is supported by a stalwart business with a wide competitive moat. Amazon's e-commerce business has become increasingly profitable over the past few years. That profitability has been driven by an increase in high-margin advertising sales as a percentage of total revenue, improvements to its logistics network to reduce shipping costs and operating expenses, and the continued growth and scale of its Prime subscription service. As a result, the operating margin for the North American retail business has expanded to 6.6% over the last 12 months, and the international segment's margin sits at a respectable 3.2%.

Amazon shares have recently been weighed down by investors' concerns about the high capital expenditures for its cloud computing business. As of Q3, its free cash flow over the last 12 months fell to $14.8 billion. But as sales continue to grow, margins expand, and capital spending levels off, Amazon should see its free cash flow soar to new highs. That could push the stock price significantly higher, making the stock worth paying a premium multiple of free cash flow for today. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) has done extremely well for its shareholders this year, and the stock hit a new all-time high of $329 in November. However, after a recent pullback, shares briefly moved below $300 and are still close to that level as of Dec. 19.

Many investors may be wondering if they should buy shares now or wait to see if Alphabet falls further, considering the recent dip in the tech sector. Personally, I wouldn't wait. Here's why. 

The benefit of investing in great companies

It's hard to find many tech companies as dominant as Alphabet. The holding company is most famous for owning Google, the world's largest search engine, but it also owns the most popular web browser (Chrome), video streaming site (YouTube), and mobile operating system (Android). Among the other businesses that Alphabet owns are Waymo, a self-driving car company, and Wing, a drone delivery service.

Alphabet generated $73.6 billion in free cash flow (FCF) over its past four reported quarters. And even with all of its successes, it remains a more affordable investment than many of the other megacap tech stocks. Trading at 29 times trailing earnings as of Dec. 17, it's the second-cheapest company among the "Magnificent Seven" (which also include Apple, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla).

Alphabet has historically outperformed the stock market. Based on the strength of its businesses, it looks likely to keep doing so.

This isn't your last chance to buy Alphabet, and truthfully, its share price could go up or down in the short term. The current price might not be the very lowest it will go in the near future. But when you're investing in great companies, you don't need to worry about timing the market. What's important is filling your portfolio with long-term winners -- not whether you bought their shares at $295, $305, or somewhere in that area.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Two of the big three cloud computing companies are Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) and Amazon (NASDAQ: AMZN). While both Google Cloud and AWS (Amazon Web Services) have seen solid growth, Alphabet's stock far outpaced Amazon's in 2025, climbing nearly 60% as of this writing, versus a modest gain for Amazon.

Let's look at which stock is set to outperform in 2026. 

The case for Alphabet

Alphabet has been one of the best-performing mega-cap tech stocks in 2025, largely because it was able to flip the script from being viewed as an AI loser to perhaps having the potential to be one of the biggest AI winners. While the company turned in some strong numbers, its performance was much more about changing perceptions.

It did this largely through the advancements with its Gemini foundational large language model (LLM) and custom artificial intelligence (AI) chips. Gemini has become one of the best LLMs in the market today, and Alphabet has infused it throughout its products, including its core search business. AI-powered features, like AI Overviews, AI Mode, and Lens, have helped the company accelerate its search revenue, while its Gemini stand-alone app has also gained traction.

At the same time, its Tensor Processing Units (TPUs) have become increasingly viewed as one of the top alternative AI chips to Nvidia's graphics processing units (GPUs). These chips are in their seventh generation, and Alphabet uses them to power much of its internal workloads, giving it a huge structural cost advantage. Meanwhile, the chips are so highly regarded that Anthropic has committed to buying $21 billion worth of them next year.

As time progresses, the advantage Alphabet has of owning both top-notch AI chips and a top-tier LLM should only widen, as it creates a powerful flywheel that will make both better over time.

The case for Amazon

While Alphabet was able to change investor perceptions this year, Amazon was not. However, the company could now be in a similar spot to where Alphabet was heading into 2025.

Much of Amazon's lackluster recent performance can be tied to the growth of AWS, which trails that of Microsoft Azure and Google Cloud. However, Amazon saw AWS revenue growth accelerate to 20% last quarter, and the company said it was capacity-constrained. As such, it's boosting its capital expenditure (capex) budget to try to meet growing demand.

At the same time, the data center that it built for Anthropic, featuring its custom Trainium chips, is still ramping up. It is also in talks with OpenAI about making an investment in the company, where OpenAI would start to use some of its AI chips. The two companies already signed a $38 billion cloud computing deal, although that was to use Nvidia GPUs.

Meanwhile, Amazon's e-commerce business is really clicking. The company is seeing huge operating leverage come from its robotics and AI investments, while its high-margin sponsored ad business is growing quickly from a large base. This could be seen in its third-quarter results, as its North America revenue rose 11%, while its segment adjusted operating income soared 28%.

The verdict

Alphabet and Amazon are two of my favorite stocks heading into 2026. Both stocks are trading at attractive valuations with forward price-to-earnings ratios (P/Es) of below 30 times and solid growth prospects ahead.

Data by YCharts.

I think Alphabet is going to become one of the biggest winners in AI over the long term, but for 2026, I think Amazon's stock can outperform. As AWS revenue continues to accelerate and Trainium gains some traction, Amazon can begin to shift perceptions, much like Alphabet did last year. I think that will really help power a stock that is trading well below other leading retailers like Walmart and Costco, which have forward P/Es nearing 40 times.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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However, many investors around the world are concerned about the Magnificent 7, given their significance to the entire US stock market and, by extension, the global economy. Some investors are feeling queasy over the possibility that the Magnificent 7-led AI boom might not be as lucrative as some optimistic projections suggest, and thus could lead to a share market correction, or even a crash.

I'm not letting worries about a whole market event that may or may not happen impact my individual assessments of each of the Magnificent 7 stocks. Saying that, there is one Mag 7 company I'd be willing to buy (more) today, and one that I would avoid in 2026.

One Magnificent 7 stock to buy in 2026

That Magnificent 7 stock is Google-owner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL). Alphabet has had a stellar 2025 to date, with Class A shares currently up 62.15% since the start of the year. This gain has still left Alphabet on a price-to-earnings (P/E) ratio of 30.7 as it currently stands.

While that is not nearly as cheap as the company was a few months ago, when it was on a sub-25 earnings multiple, it still leaves it at a compelling entry point in my view. Despite its size, Alphabet is still growing at a healthy clip. In its most recent quarterly earnings from October, Alphabet reported year-on-year revenue growth of 16% to US$102.3 billion for the three months to 30 September.

Earnings per share (EPS) rocketed by an even more impressive 35% to US$2.87.

Given the near-monopoly that Google Search enjoys, together with the success of YouTube and Google Cloud, I think Alphabet has plenty of growth left in the tank. And that's not even factoring in the advances Alphabet has made with its Gemini AI platform. Alphabet is one of the cheapest members of the Magnificent 7 right now. Given its growth and future plans, I think this stock is one to watch and potentially buy in 2026.

One stock to avoid

Whilst Alphabet is looking very interesting right now, I cannot say the same for its fellow Mag 7 member, Apple Inc (NASDAQ: AAPL). Apple is an incredible company, to be sure. It would have to be to compel Warren Buffett to make it Berkshire Hathaway's largest single investment.

However, looking at the Apple stock price today, as well as its recent growth rates, I don't see much to like. Apple is far more expensive than its Magnificent 7 peer, Alphabet, right now, given its current 36.82 P/E ratio. Yet it is growing at a much slower pace. Its own most recent quarterly report showed the company growing revenues by 8% year on year to US$102.5 billion, while EPS was up 13% to US$1.85. Sure, Apple had a good year, with its most recent round of iPhones seeing above-average interest. But if that isn't repeated in 2026, we could see much lower numbers.

Additionally, I don't see much in the way of exciting growth avenues for the company ahead. Its present AI offerings are arguably inferior to Magnificent 7 competitors like Alphabet and Microsoft, and the company remains dependent on hardware for the lion's share of its earnings. I'd be happy to buy more Apple shares in 2026, but not at anything close to a P/E of 36.

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The rise of artificial intelligence (AI) has served as an unprecedented bellwether for technology stocks over the last three years. In particular, semiconductor stocks including Nvidia, Taiwan Semiconductor Manufacturing, and Broadcom were all ushered into the trillion-dollar club thanks to the AI revolution. 

As investment in AI infrastructure continues to unfold, I think it's likely that chip stocks will remain sound investment choices. But as 2026 approaches, I see a different tech titan taking center stage: Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG).

Let's dig into how Alphabet has built an AI fortress poised to dominate the future. From there, I'll explore the company's valuation trends and make the case for why now is a great time to buy Alphabet stock hand over fist. 

It's been a quiet three years for Alphabet...until now

The AI revolution kicked off almost exactly three years ago when OpenAI commercially launched ChatGPT. ChatGPT quickly captured the imaginations of people all over the world with its ability to answer virtually any question instantly.

The dramatic rise in popularity among large language models (LLMs) caused some on Wall Street to pose the idea that traditional search tools like Google were headed for doom. Think of the business stakes at hand here: Why would advertisers continue paying a premium on platforms like Google and YouTube when everyone's attention was flocking to chatbots?

While Alphabet's advertising business did show some signs of stalling, the company's cash cow remained somewhat resilient. For a couple of years, revenue from Google and YouTube wasn't as robust as it once was, but it also wasn't plummeting at an alarming rate.

What many investors were overlooking, however, was Alphabet's other ventures. At the beginning of the AI revolution, Google Cloud was operating at an annual revenue run rate of about $29 billion. Meanwhile, this segment of Alphabet's business was unprofitable.

Fast forward to today, and Google Cloud is now on pace for more than $50 billion of annual sales while boasting positive operating income. What's even more interesting is that Google Cloud has won major deals with both OpenAI and Anthropic -- the two LLMs that were once seen as the ultimate existential threat to Google's relevancy.

Besides the success of its cloud division, Alphabet has also successfully launched its own LLM -- called Gemini. According to management, Gemini has over 650 million monthly active users (MAUs) while search queries are increasing threefold quarter over quarter.

Why 2026 could be epic for Gemini

For most of the AI revolution, I think the consensus view around Alphabet was one of uncertainty. While not everyone bought into the extinction of Google narrative, it's fair to say that it took some time for Alphabet to prove its AI ambitions were bearing fruit.

One of the biggest catalysts the company has going into next year is an extension of Google Cloud through commercializing custom hardware. Specifically, Alphabet's application-specific integrated circuits (ASICs), known as tensor processing units (TPUs), have seen some early traction with Apple and Anthropic.

While TPUs aren't going to dethrone Nvidia's GPU business anytime soon, I think Alphabet is on the cusp of unlocking a new wave of growth in the cloud infrastructure market that's currently dominated by Amazon Web Services (AWS) and Microsoft Azure.

Alphabet stock could soar to new highs next year

As of this writing, Alphabet's forward price to earnings (P/E) ratio is hovering around 28 -- its highest level during the AI boom.

GOOGL PE Ratio (Forward) data by YCharts

Normally, I tend to stay away from momentum stocks. More times than not, by the time a company reaches a record high, it's dicey to buy the premium and expect shares to move materially higher.

This is a rare instance where I think the opposite is true. Alphabet's current price increase reflects two factors: An appreciation for the company's current operating performance and a bullish outlook that Alphabet will keep up its strong performance.

Alphabet's ecosystem -- from search, cloud computing, consumer electronics, custom hardware, and more -- is a major differentiator compared to its mega cap peers. The company has a unique flexibility stitched into its DNA -- benefiting from AI across its various assets and subsidiaries during any market cycle. These dynamics position Alphabet as a particularly durable business for the long run.

As investments in AI infrastructure are expected to continue rising going into next year, I expect Alphabet to benefit from these tailwinds more so than any one singular chip designer or software developer.

With this in mind, I think Alphabet will continue to show signs of accelerating revenue and profit margin expansion across its entire business next year -- which should lead to even more buying from shareholders. Against this backdrop, I see Alphabet as the best opportunity in the AI landscape as 2026 approaches. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The stock market is witnessing a technological arms race playing out in real time. Companies are racing to build the data centers and other infrastructure to support artificial intelligence (AI), which experts believe could create trillions of dollars in economic value over the coming decades.

Inside these data centers are massive clusters of chips, which work together to train and operate AI models. The AI chip conversation begins with Nvidia (NASDAQ: NVDA), the company that has dominated this market from the jump.

However, tech giant Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) has emerged as a potential competitor after successfully training its AI models with custom-built TPU chips it designed in-house.

Which AI chip stock is the better buy heading into 2026? 

Nvidia's AI dominance creates a high ceiling, but a lower floor

Thus far, developing AI has required massive quantities of chips. Nvidia's leadership in the AI chip market has translated to explosive revenue and profit growth for the company since early 2023. Some experts believe Nvidia's market share in the data center GPU chip space is as high as 92%.

As long as hyperscalers continue to build out this infrastructure, it's hard to see Nvidia's business slowing down anytime soon. In fact, Nvidia announced that it has booked $500 billion in orders for its Blackwell chips and their looming successor, Rubin, through the end of next year, with $150 billion of that already delivered.

This data center boom has been highly lucrative. Nvidia now has deep pockets to develop and prepare for emerging AI opportunities outside of data centers, such as autonomous vehicles and humanoid robotics. That said, data center chip sales have become nearly the entirety of Nvidia's business. If data center investments dry up, Nvidia would struggle to fill those holes, and the stock would likely collapse.

Alphabet's AI ecosystem makes it the safer bet

For as much money pouring into AI data centers as there is, the group of companies cutting the checks, the AI hyperscalers, is relatively small. Among them is Google's parent company, Alphabet. Rather than relying on Nvidia's chips to power its AI models, Alphabet has worked diligently to develop its own custom-built tensor processing units, or TPUs, designed specifically for Google Cloud's machine learning workloads.

Alphabet successfully trained its newest Gemini model on its TPUs. It went so well that the company is considering selling its TPUs to other AI hyperscalers, such as Meta Platforms. Alphabet probably won't challenge Nvidia's market leadership, but the TPU represents additional upside to Alphabet's complete AI ecosystem. It's icing on an already delicious cake.

The stock already has a high floor due to its lucrative advertising and cloud computing business segments. Even if Alphabet never sells its TPUs to another company, they still provide a crucial cost benefit, saving Alphabet from spending billions of dollars on third-party chips. At this point, it appears that Alphabet has a significantly higher floor than Nvidia.

The winner? It depends

Does that make Alphabet the better buy? Well, it sort of depends on the style of investor you are. If you want maximum upside, it's hard to beat Nvidia, which has proven to possess the foresight needed to dominate the AI opportunity from the beginning. Even if other companies begin encroaching on the data center market, Nvidia will likely remain a key player in the AI field, including future applications.

However, if you're looking for a business that is a bit more diversified and stable, Alphabet may be a better fit for you. The company has multiple established business units and still offers exposure to new industries, like autonomous driving and quantum computing, through its smaller divisions.

The good news? Both stocks trade at attractive valuations, based on the market's expectations for their future earnings growth.

NVDA PE Ratio data by YCharts

A higher anticipated growth rate accompanies Nvidia's higher price-to-earnings ratio, though things can change quickly if the AI investment cycle ends prematurely. 

Ultimately, it's hard to go wrong with either company as a buy-and-hold AI investment for 2026 and beyond.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The "Magnificent Seven" stocks have produced the lion's share of the S&P 500's long-term gains. This group of stocks represents 35% of the S&P 500, and if these seven stocks continue to outperform the index, their presence in the S&P 500 will grow.

Although each of these stocks has been a long-term winner, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) may be the most promising pick of the bunch.

It looks like a promising buy in 2026 due to strong financials and long-term artificial intelligence (AI) tailwinds. Alphabet has been a cloud computing and search leader for many years, but it might just become a physical AI leader as well.

These are some of the reasons investors may want to take a closer look at Alphabet in 2026.

High cash flow lets Alphabet invest in more ventures 

Alphabet isn't the only company that's investing in physical AI, but few companies can compete with its cash flow and steady profits. Alphabet's strong financial position gives it the flexibility to endure losses on start-ups for multiple years before turning a profit.

That's part of the reason why Alphabet has silently emerged as an autonomous vehicle leader through Waymo. Alphabet recently started offering its AI chips to third parties, and it can become a multibillion-dollar segment.

Alphabet has $98.5 billion in cash, cash equivalents, and marketable securities on its balance sheet. The tech giant also brought in $35 billion in net profits in Q3, which was up by 33% year over year.

Google Cloud used to be a small part of Alphabet's overall business. Now, it's one of the three giant cloud providers. Alphabet can experience similar success with Waymo, AI chips, and other parts of its business.

Alphabet has multiple high-growth business

Alphabet doesn't just rely on online ads, which is one of the few downsides of fellow Magnificent Seven stock Meta Platforms (NASDAQ: META). Google's parent company has several businesses like search, cloud, and subscriptions, and they're all growing.

"Alphabet had a terrific quarter, with double-digit growth across every major part of our business," Alphabet CEO Sundar Pichai said in the company's Q3 earnings release.

It was also the first quarter that Alphabet earned $100 billion in revenue. Google Cloud was a major highlight, with revenue up by 34% year over year. That part of the business also has a $155 billion backlog.

Cloud computing makes up roughly 15% of the company's total revenue. As this segment grows, it will make up a larger percentage of total revenue, which can boost Alphabet's total revenue growth rate.

The Gemini app was another key business segment. Alphabet's AI model now has 650 million monthly active users. Alphabet has multiple growth drivers that work well with each other and have delivered excellent results over several years.

Most Magnificent Seven stocks are less diversified

Alphabet is one of the Magnificent Seven stocks driving the S&P 500 to new highs, and it's one of the most diversified companies among the group.

Tesla (NASDAQ: TSLA) heavily relies on automobile sales, with humanoid robots offering significant potential. Apple (NASDAQ: AAPL) heavily relies on iPhone sales, while Meta Platforms generates almost all of its cash flow from online ads. Nvidia (NASDAQ: NVDA) relies on AI chips and software that revolves around its chips.

Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) are the other two well-diversified members of the Magnificent Seven. Both tech giants have competing cloud computing providers and multiple revenue streams.

However, Alphabet is experiencing double-digit growth rates across all of its key businesses. Amazon's online store sales were only up by 8% year over year, excluding foreign exchange rates. That part of Amazon's business accounts for more than one-third of total sales.

Meanwhile, Microsoft only delivered 4% year-over-year revenue growth for its more personal computing segment in Q1 FY26, which made up almost 30% of total revenue.

Alphabet's key businesses are still gaining market share, and AI should accelerate growth rates while resulting in new high-growth segments making a meaningful difference in future earnings results.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has had an unbelievable year. And investors should have zero complaints. As of Dec. 12, shares have climbed 63% in 2025. There is some serious positive momentum working in the company's favor.

After such a monumental gain and a $3.7 trillion market cap, should you invest $1,000 in this top tech stock right now? 

Alphabet's valuation looks reasonable

Investors would be wise to consider adding this dominant internet business to their portfolios. Valuation is one of the main reasons why. Shares currently trade at a forward price-to-earnings ratio of 28, a multiple that is justified given Alphabet's economic moat, history of innovation, and huge free cash flow.

The stock will continue winning

The stock has crushed the S&P 500 index in the past five years. And it's poised to keep this streak going between now and 2030.

That confidence stems from Alphabet's ability to find new avenues to make money. The company is planning to introduce ads to its extremely popular Gemini app next year, which has 650 million monthly active users. This is a smart way for the business to monetize its user base that opts to use the free service instead of a paid tier.

Alphabet generated $74 billion of ad revenue in the third quarter, a figure that should continue marching higher and lifting profits in the process.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What's unusual is that the Google parent was substantially smaller than the software giant until recently, when Alphabet pulled ahead. Considering that surge by Alphabet, is it the better investment among multitrillion-dollar companies in the AI realm, or should investors stick with Microsoft?

The case for Microsoft

Microsoft has long been a leading cloud company, but it stood out in the AI race because early on it took what is now a 27% ownership stake in OpenAI. Thus, upon the release of GPT-4, that partnership appeared to put Microsoft stock in a strong position as the frenzy around generative AI began to take hold.

To this end, it has developed its own AI engine, called Copilot, which stands out within Microsoft's ecosystem. Still, Microsoft has likely drawn the most investor attention from its partnerships. Despite its OpenAI stake, both companies are free to partner with other AI companies. More recently, Microsoft made an agreement with Anthropic to scale Claude AI on Azure servers powered with Nvidia chips.

Microsoft can also afford such investments. Over the last 12 months, it generated almost $78 billion in free cash flow, and that does not include the $69 billion in capital expenditures (capex) invested over that time.

Moreover, with the earlier ties to OpenAI, Microsoft rose significantly in prior years, so year-to-date gains have slowed to about 14%. It also trades at a P/E ratio of 34, though it is not far above the S&P 500 average of 31. Ultimately, given its continued progress in AI, that slightly above-average valuation is unlikely to stop the steady rise of Microsoft stock.

Why investors might choose Alphabet

After ChatGPT came on the scene, investors began to question whether Alphabet's Google Search engine was on the way to obsolescence. Its AI-enabled queries bypassed the ads that have long been the source of most of Alphabet's income.

However, Alphabet launched Google Gemini to compete with ChatGPT. At first, it seemed like just another AI engine, but over the last few months, it has emerged as the site of choice for real-time information, video generation, and unstructured prompts thanks to the improvements in Gemini 3.

Additionally, even amid the skepticism, Alphabet's revenue grew, and it continued to generate massive free cash flows. This has funded Gemini's improvements, along with its other AI-related businesses, such as Google Cloud and the autonomous driving platform Waymo.

Furthermore, investors should expect continued improvements as the company plans to spend $91 billion to $93 billion on capex this year alone. Despite that spending, its free cash flow was just under $74 billion over the last 12 months, an indication it can afford these massive outlays.

Also, despite gaining around 70% so far this year, Alphabet stock trades at a 32 P/E ratio, close to the S&P 500 average. When one also factors in the increasing strength of its AI-related businesses, such conditions could make the Google parent an attractive choice.

Microsoft or Alphabet?

Both stocks have shown they are industry leaders in AI, and thus, it is likely that both stocks will continue moving higher. However, if you're choosing between the two, Alphabet likely holds the edge.

Indeed, investors should commend Microsoft for its early moves in AI and its ability to make itself essential to more than one major AI engine.

Still, both the stock price and valuation seem to already reflect that growth. Conversely, Alphabet investors may still benefit from a delayed reaction to the Google parent's AI.

Alphabet has spent more than Microsoft on capex, and it has overcome perceptions that AI was passing it by. When also considering its slightly lower valuation, Alphabet should remain in a stronger position to drive higher returns over time.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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While the market is on pace for a strong 2025, most of the stocks in the "Magnificent Seven" merely had good, not fantastic, years. But one Magnificent Seven stock clearly took the crown in 2025: Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).

GOOG Year to Date Total Returns (Daily) data by YCharts.

As you can see, Alphabet's 64% return trounced the rest of the Magnificent Seven, beating 2025's second-best performer, Nvidia (NASDAQ: NVDA), by a whopping 33 percentage points and most of the others in the group by more than 50 points.

Here's how Alphabet did it and why the rally may very well continue into 2026.

Alphabet entered the year as the cheapest Magnificent Seven stock and still isn't expensive

Coming into the year, Alphabet had been a notable laggard, with its valuation reflecting considerable fear, uncertainty, and doubt in the age of generative artificial intelligence (AI). As a result, Alphabet began the year at the lowest valuation of the group. At one point, its price-to-earnings (P/E) ratio even touched the high teens -- below the average valuation of the S&P 500.

Yet, as you can see, even with this year's vast outperformance, Alphabet retains the second-lowest P/E ratio of the group at 30.6 times trailing earnings, barely beating out Meta Platforms.

GOOG PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.

Alphabet engineered a turnaround, and Buffett saw it coming

The primary concern entering the year was that AI chatbots might eventually disrupt Google Search, which is still Alphabet's largest profit center. It's also true that, early in the year, Google Search showed a concerning deceleration in paid clicks. Yes, there was still growth, but by the first quarter, paid click growth had fallen to just 2%, with concerns that it might eventually go negative.

However, on its second-quarter earnings, Alphabet began to prove that narrative wrong, as Search paid clicks reaccelerated to 4% growth. That might have been when Warren Buffett or his lieutenants decided to buy Alphabet stock for the Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) portfolio. Whatever the reason, the buy proved prescient, as Search paid click growth accelerated yet again in the third quarter to 7%. 

AI improvements bolstered Search and Gemini

It wasn't just a matter of luck that Alphabet was able to reaccelerate Search paid clicks. The reacceleration of Search happened just after Google introduced AI Mode in May, giving Search users the option of a chatbot-like experience powered by Alphabet's own homegrown large language models (LLMs). It appears the improvement, combined with 2024's introduction of AI Overviews, caused Search users to reengage.

Of course, all of that AI infusion into Search would have been for naught if Alphabet's AI models weren't competitive. However, Alphabet has clearly upped its AI game over the past year. The vast improvement was confirmed by the November introduction of Gemini 3, Alphabet's latest LLM, which rapidly climbed to the top of several industry benchmarks, beating out even the latest ChatGPT model on many important tasks.

The introduction of Gemini 3 appears to signify at least a near-term changing of the guard in the AI race, as ChatGPT had pretty much retained its first-mover advantage since introducing LLM chatbots to the world in late 2022. Subsequent to Gemini 3's launch, OpenAI CEO Sam Altman issued a "code red" memo to OpenAI's employees.

Alphabet can maintain its new lead in the AI race

Years ago, Alphabet had a virtual monopoly on artificial intelligence research before OpenAI was formed to challenge its industry-leading research lab. In fact, Alphabet's researchers were the first to innovate transformer technology, which is the backbone of modern-day LLMs.

Not only does Alphabet have a longer history of deep AI research than even OpenAI, but it has also designed its own proprietary AI chips for the past decade. Alphabet trained Gemini not on expensive Nvidia chips but on its in-house-designed Tensor Processing Units, or TPUs. That's a proprietary technology of Google and a point of differentiation.

Proprietary AI research and in-house chips have enabled Google to become a vertically integrated AI player with the most extensive collective experience in the field. And although OpenAI clearly caught Alphabet off guard when it unveiled ChatGPT three years ago, it appears that Alphabet has now caught up and surpassed OpenAI, at least for now.

Given Alphabet's significantly greater financial resources, more years of AI research experience, and its own proprietary chips, Google may even continue to augment its new lead.

Why things could get even better for Alphabet in 2026

Not only that, but Alphabet also has several businesses it can infuse with its newfound AI leadership. For instance, many of the most reputable private AI labs conduct their research on Google Cloud, thanks to its proprietary TPU option alongside the standard GPU formats. Google's cloud business is accelerating and could become a meaningful new profit center in the years ahead.

Additionally, Alphabet's self-driving unit, Waymo, appears to be growing by leaps and bounds. This past spring, Waymo reached one million autonomous rides per month, and it surpassed 14 million rides in 2025 as of December -- more than triple the number of rides delivered the previous year. Waymo also just began delivering autonomous rides on freeways, and Alphabet plans to expand Waymo services in 20 cities in 2026.

Autonomous robotaxis could become a significant business in a few years, and Waymo has a substantial first-mover advantage in this space. That could add still another leg to Alphabet's burgeoning empire across Search, AI services, YouTube, Cloud, hardware, subscriptions, and other next-generation technology bets.

In other words, with the big looming fear regarding Search seemingly quelled for now, one could argue that Alphabet should be priced higher than its other Magnificent Seven peers today, rather than the second-cheapest of the bunch.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why the best-performing "Magnificent Seven" stock of 2025 is still a buy for 2026 appeared first on The Motley Fool Australia.

Buffett is now approaching retirement, with plans to hand over his CEO role to Greg Abel, currently the company's vice-chairman of non-insurance operations, at the end of the year. But this expert investor has remained active in his final months and quarters of leadership. And that means we can take a look at what Buffett's latest portfolio moves say about the market...

Good news for Buffett fans

First, though, here's some good news for all of you Buffett-watchers: Buffett still will be around as chairman, will go into the Berkshire Hathaway office to share ideas with the team, and he's promised to continue communications through an annual Thanksgiving message. So we may hear about Buffett's thoughts on key subjects well into the future.

Now, let's consider Buffett's general investment strategy over time and the moves he's made in recent quarters. Buffett is known for choosing quality companies with solid competitive advantages, or moats, and investing in them for the long term. The billionaire won't jump into the latest trend even if everyone else is doing so -- and even if it's delivering big returns fast. Buffett prefers companies he can count on over time, and this strategy has been a successful one.

One extremely important point is that Buffett favors value stocks, meaning he aims to buy stocks trading for less than what they truly are worth. The idea is that the rest of the investment community eventually will recognize the strengths of these particular companies and buy the shares -- and these stocks then will rise.

So, what has Buffett been doing lately? The billionaire's moves have been very clear: Over the past 12 quarters, he's been a net seller of stocks, and he's built up Berkshire Hathaway's cash position to reach record levels.

BRK.B Cash and Short Term Investments (Quarterly) data by YCharts

Meanwhile, in his 2024 letter to shareholders, Buffett wrote that it's rare to be "knee-deep" in buying opportunities.

Buffett's moves suggest one thing...

This, along with Buffett's focus on value, says something very clear about the market today -- and a key market metric supports this. The S&P 500 Shiller CAPE ratio, a view of stock price in relation to earnings over 10 years, recently reached beyond 39, a level it's only surpassed once before.

S&P 500 Shiller CAPE Ratio data by YCharts

Buffett's actions, supported by this valuation metric, suggest the stock market is expensive and has been so for a while. But, before you make any abrupt investing decisions based on this, it's important to take a deeper look into Buffett's moves. The Oracle of Omaha, as he's often called, hasn't stopped investing. He's still found opportunities -- for example, he picked up shares of UnitedHealth Group in the second quarter and shares of Alphabet in the third quarter.

Both of these stocks were inexpensive at the time, and they continue to be reasonably priced. This shows us that, even if the overall stock market is pricey, investors still may find interesting opportunities.

UNH PE Ratio (Forward) data by YCharts

Now, looking specifically at the Alphabet purchase, we can draw an additional conclusion. Though technology and artificial intelligence (AI) stocks have climbed over the past few years, this doesn't mean that every AI player is expensive. It's important to consider each company individually -- if you don't, you might miss out on a deal today that may become a winner down the road.

So, Buffett's moves over the past several quarters -- from his selling activity to his accumulation of cash -- suggest that today's market is expensive. And the Shiller CAPE ratio confirms this. But Buffett doesn't recommend staying away. Instead, his investing principles ring true in any market environment, including today's: Look for value, and when you find it, buy and hold for the long term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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