But with so many to choose from, it can be hard to decide which ones to buy.

Don't worry, I will now narrow things down by picking out three that could be best buys as the month of May approaches rapidly.

Here's why they could be worth considering for a $1,000 investment:

BetaShares Nasdaq 100 ETF (ASX: NDQ)

The first ASX ETF to consider is the BetaShares Nasdaq 100 ETF.

This ETF provides exposure to 100 of the largest non-financial companies listed on the Nasdaq exchange. It is heavily weighted towards technology and growth-oriented businesses.

Its holdings include companies such as Apple (NASDAQ: AAPL), Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and NVIDIA (NASDAQ: NVDA).

Demand for AI, cloud computing, and digital services continues to support growth across this group of companies. This could make the BetaShares Nasdaq 100 ETF a strong performer over the next decade and beyond.

iShares S&P 500 ETF (ASX: IVV)

Another ASX ETF to consider is the iShares S&P 500 ETF.

This ETF tracks the performance of the S&P 500 Index, giving investors access to 500 large-cap US stocks.

Its holdings include companies such as Apple, Microsoft, Amazon, Walmart (NYSE: WMT), and McDonald's (NYSE: MCD).

This means that the iShares S&P 500 ETF provides broad exposure to the US economy, which remains the largest and most influential market globally. It also offers diversification across sectors and tends to be less concentrated than more thematic ETFs.

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

A third ASX ETF to consider is the VanEck Morningstar Wide Moat ETF.

This ETF focuses on companies that are judged to have sustainable competitive advantages, often referred to as economic moats.

Its holdings include companies such as Alphabet (NASDAQ: GOOGL), Visa (NYSE: V), and Airbnb (NASDAQ: ABNB). Visa stands out due to its global payments network, which benefits from high margins and strong network effects.

In addition, the VanEck Morningstar Wide Moat ETF incorporates a valuation overlay, selecting companies that are not only high quality but also trading at what is considered an attractive price.

This combination of quality and valuation offers a different approach compared to traditional index tracking ETFs.

The post Are these the best ASX ETFs to buy with $1,000 in May? appeared first on The Motley Fool Australia.

Thanks partly to our unique system of franking, as well as some good old fashioned love of country, it's fair to say that ASX investors have a strong local bias.

When we do branch out to invest beyond our shores, it is usually a direct flight to the US markets. As I've written here before, the US is, as it should be, the first port of call for ASX investors seeking international diversification. No one can deny that the US is home to the vast majority of the world's best and most dominant businesses. No other country's share market constituents can match the size, scope and scale of top US stocks like Amazon, Alphabet, Microsoft, Netflix, Mastercard, Procter & Gamble, Apple, and countless others.

However, that doesn't meaning investing in US stocks isn't without risk. The US-Iran war that has been raging all month proves that. As such, I think the prudent investor might wish to consider diversifying beyond just Australia and America. The easiest way to do this, by far, is by using exchange-traded funds (ETFs).

Let's go through some of the best options for stocks outside Australia and the US.

3 ASX ETFs that can help diversify a portfolio

First up, there's the Vanguard All-World ex-US Shares Index ETF (ASX: VEU). This ETF, as its name implies, throws a whole bunch of different countries' stock markets together, with the notable exception of the US. The largest contributors to VEU's portfolio include Japan, the United Kingdom, China, Canada, India, and Taiwan. A healthy mix of advanced and developing economies there. ASX do feature in this ETF as well, although they make up just 4.3% of the entire portfolio.

Another option to consider is the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). VGE focuses exclusively on emerging economies, so you won't find European, British or Japanese stocks here. Instead, VGE's largest contributors are countries like China, Taiwan, Brazil, South Africa and Saudi Arabia.

Finally, investors can consider the iShares MSCI EAFE ETF (ASX: IVE). This fund covers markets from Europe, Asia and the Far East (EAFE). It offers exposure to countries ranging form Japan, Spain and the UK to Germany, Singapore and Israel. Again, Australia is included as well, but contributes just over 6% to IVE's holdings.

Foolish takeaway

All three of these ASX ETFs offer Australian investors an easy way to add exposure to stocks from Europe, Asia and Africa to their portfolios. These regions are under-represented in the vast majority of ASX portfolios, and can help insulate investors from adverse movements on the American or Australian markets.

The post These 3 ASX ETFs can help protect your portfolio in 2026 appeared first on The Motley Fool Australia.

If you are one of them, or are planning to become one, and are looking for investment ideas, then read on.

Listed below are three super ASX exchange traded funds (ETFs) that could be top picks for an SMSF. Here's what you need to know about them:

VanEck MSCI International Quality ETF (ASX: QUAL)

The first ASX ETF that could be a strong fit for an SMSF is the VanEck MSCI International Quality ETF.

This ETF focuses on high-quality global companies with strong balance sheets, consistent earnings, and high returns on capital. Rather than chasing short-term growth, it targets businesses that have proven their ability to perform across economic cycles.

Holdings include stocks such as Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Visa (NYSE: V). These businesses operate at global scale and benefit from entrenched positions in their respective markets.

For an SMSF, the VanEck MSCI International Quality ETF can work as a core international holding, offering exposure to global leaders while leaning toward financial strength and durability rather than speculation.

It was recently recommended to investors by the fund manager.

Betashares Global Defence ETF (ASX: ARMR)

Another ASX ETF that may appeal to SMSF investors is the Betashares Global Defence ETF.

This fund provides exposure to global defence companies at a time when government spending in this area is increasing. Geopolitical uncertainty, regional conflicts, and heightened focus on national security have led many countries to commit to higher defence budgets over the long term.

Holdings include companies such as Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), and RTX Corporation (NYSE: RTX). These businesses often benefit from long-dated government contracts, which can provide revenue visibility.

Overall, the Betashares Global Defence ETF offers exposure to a sector that is less tied to consumer spending and economic cycles, adding diversification to a long-term portfolio.

This fund was recommended by the team at Betashares.

Betashares Global Cash Flow Kings ETF (ASX: CFLO)

A final ASX ETF to consider for an SMSF is the Betashares Global Cash Flow Kings ETF.

This fund invests in global companies with strong and consistent free cash flow generation. This focus can be particularly attractive for retirement-focused investors, as cash flow underpins dividends, reinvestment, and balance sheet strength.

Holdings include stocks such as Alphabet (NASDAQ: GOOGL), Costco Wholesale (NASDAQ: COST), and Johnson & Johnson (NYSE: JNJ). These businesses generate significant cash while operating in industries with long-term demand.

The Betashares Global Cash Flow Kings ETF could complement growth-oriented holdings by adding exposure to companies that emphasise financial discipline and sustainable returns. It was also recently recommended by the fund manager.

The post 3 super ASX ETFs to add to your SMSF appeared first on The Motley Fool Australia.

However, it's my view that these balanced options are not a great fit for everyone. As I've discussed before, Australians under the age of 40 might be better off investing in a more growth-oriented fund that forgoes the stability that cash and bonds provide for a higher potential return by going all in shares. As anyone under 40 probably isn't going to retire anytime soon, stability and capital protection arguably shouldn't be high priorities at this stage of life.

When it comes to my own superannuation, I've put my money where my mouth is. My superannuation provider offers the choice of selecting individual index funds that I can invest my super into. So today, let's talk about the three ASX ETFs that I use within my super fund to achieve the best returns possible. The funds themselves aren't publicly traded, but have ASX counterparts which are essentially the same offering.

Three ASX ETFs that I've built my super fund around

Australian and international stocks

First up, we have a good old-fashioned S&P/ASX 200 Index (ASX: XJO) fund. Roughly 40% of my super fund goes towards an ASX 200 index fund, one rather similar to the iShares Core S&P/ASX 200 ETF (ASX: IOZ) or the SPDR S&P/ASX 200 ETF (ASX: STW). This fund holds the largest 200 stocks on the ASX. That's everything from Westpac Banking Corp (ASX: WBC) and Woolworths Group Ltd (ASX: WOW) to JB Hi-Fi Ltd (ASX: JBH) and Suncorp Group Ltd (ASX: SUN).

This index fund represents the best of Australian business. As ASX shares have historically delivered meaningful growth and healthy dividend income, I am very happy for this fund to receive some of my retirement cash.

Next up, another 50% or so of my super capital goes towards an international shares ETF. This ETF holds hundreds of different stocks from dozens of advanced economies around the world. These include the United States of America, the United Kingdom, Japan, Germany and France, among many others. A listed equivalent might be the Vanguard MSCI Index International Shares ETF (ASX: VGS).

Australia is a wonderful place to invest, but its best companies simply don't have the firepower that international markets do. That's why I'm happy that this component of my super fund invests in world-dominating stocks like Apple, Amazon, NVIDIA, Mastercard, Alphabet, Toyota and Nestle.

Adding some diversity to my super fund

My super fund's final holding, making up that final 10% or so, provides even more diversification. It is an emerging markets fund, drawing thousands of holdings from emerging economies around the globe. An ASX equivalent might be the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). It offers exposure to countries like China, India and Taiwan. I think these economies will offer a lot of growth over the next few decades, and, as such, I am happy to have part of my super fund invested there.

Foolish takeaway

As I am still a few decades away from the traditional retirement age, I am happy to have 100% of my super fund invested in shares. With the three ETFs mentioned above, I feel that I have adequate diversification across multiple markets and currencies, whilst still maintaining exposure to some of the world's best companies. Individually selecting these investments also keeps my super costs as low as possible, which is of vital importance for building wealth over decades.

The post Here are the 3 ASX ETFs I use for my super fund 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.

Shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant closed yesterday trading for $30.31. In afternoon trade on Tuesday, shares are changing hands for $30.33 apiece, up 0.1%.

That sees Woolworths share up 3.2% so far in these early days of 2026 and up 17.1% since plumbing one-year lows on 14 October.

That's the latest share price action for you.

Now here's how the supermarket aims to embrace artificial intelligence (AI) to improve its customers' shopping experiences and potentially boost its own sales.

Woolworths shares forging closer link with Google

As The Australian Financial Review reports, Woolies has inked a deal with Alphabet Inc Class A (NASDAQ: GOOGL) to use Google's Gemini product in its Olive chatbot.

While the longer-term impact on Woolworths shares remains to be seen, the deal with Google makes Woolies the first Aussie supermarket to enable AI to actually shop for its customers.

The Gemini empowered Olive won't be allowed to automatically make customer purchases, but Google noted the chatbot will be able "add items to their cart and even handle checkout", if the customers wish.

Olive will also be able to assist with planning weekly meals and recipes. The Gemini-powered chatbot is scheduled to go live later in 2026.

Commenting on Woolworths' adoption of Gemini, Google Australia managing director Melanie Silva said (quoted by the AFR):

We're moving into the era of the 'AI agent'. That sounds technical, but it's actually pretty simple. Up until now, AI has been great at giving you information. Agents are all about doing something with it. It's the difference between a tool that just answers a question, and a helper that thinks one step ahead to actually help you get a job done.

Woolworths CEO Amanda Bardwell added:

We are evolving our digital shopping assistant Olive into an intuitive partner that won't just answer questions, but actually anticipates your needs – planning meals based on what you love and spotting the specials that matter. This is a practical innovation that's all about us … making shopping that little bit easier to give you time back in your day.

Commenting on the impact on customer shopping habits, and by connection the potential impact on Woolworths shares, Craig Woolford, an analyst at MST Marquee, said, "It will potentially be saving them time and making the specials more visible, but it really depends on the uptake."

The post Buying Woolworths shares? Here's how the supermarket is tapping into the AI revolution appeared first on The Motley Fool Australia.

Like most portfolios, mine had both winners and losers in 2025.

Today, I'll discuss two of my top performers and explain why I decided to invest in them.

My two best stocks of 2025

Newmont Corporation (ASX: NEM)

First up, we have Newmont Corporation. This ASX gold miner is an accidental position in my portfolio, arriving as a result of the US-based Newmont taking over my old position in Newcrest Mining in 2023.

When I bought Newcrest shares a few years ago, it was due to a belief that the gold price was undervalued and that geopolitical and economic tensions could push it higher. Perhaps unfortunately, this thesis has played out, with gold reaching several new record highs in 2025.

As a result, the Newmont share price exploded last year. It rose from $59.54 a share in January to $150.20 by the end of December. That's a gain worth a whopping 152.27%, making it the best stock in my portfolio in 2025. The four dividends that Newmont paid out last year boost that return even further.

Normally, I don't like to play commodities stocks. However, I view Newmont as a hedge, or insurance, position in my portfolio. I am happy to keep it for the time being, despite its blowout performance last year, given the ongoing uncertainties in the global economy.

Alphabet Inc (NASDAQ: GOOGL)

My second-best stock in 2025 is none other than an American stock – the Google-owner Alphabet. Alphabet's near-monopoly as the gatekeeper of the internet attracted me to this company years ago. Its other ventures, which range from YouTube and Google Workspace to the self-driving company Waymo, are added bonuses.

Between January and April last year, the Alphabet share price dropped close to 30%, largely due to concerns that AI tools were about to eat its lunch. I thought these fears were overblown, given the leading role that Alphabet's own Gemini AI platform was taking. When the company's price-to-earnings (P/E) ratio got below 17 in April, I thought it was a huge opportunity to pick up even more shares of a company that is still growing at an incredible pace.

That dip didn't last long, and by the end of the year, Alphabet was up to US$313 a share. That was 65.35% higher than the US$189.30 it started 2025 at, as well as 122.7% above the 52-week low of US$140.53 it hit in April.

The post These were my 2 best stocks of 2025 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.

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The good news is that exchange-traded funds (ETFs) remove much of that pressure and offer a simple way to invest.

With a single investment, you can gain instant diversification and exposure to hundreds or even thousands of companies.

For Australians starting their investing journey in 2026, here are five ASX ETFs that stand out as sensible, beginner-friendly options.

Vanguard Australian Shares ETF (ASX: VAS)

The Vanguard Australian Shares ETF is often considered a cornerstone ETF for local investors. It provides exposure to the 300 largest shares listed on the ASX, making it an easy way to invest in the Australian economy as a whole.

Its portfolio includes blue-chip names such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Ltd (ASX: CSL), and Wesfarmers Ltd (ASX: WES). For beginners, this fund offers simplicity, diversification, and a steady stream of income over time.

iShares S&P 500 ETF (ASX: IVV)

If you want global exposure without complexity, the popular iShares S&P 500 ETF is a strong place to start. It tracks the S&P 500 Index, giving investors access to 500 of the largest stocks in the United States.

Holdings include Microsoft Corp (NASDAQ: MSFT), Apple (NASDAQ: AAPL), NVIDIA Corp (NASDAQ: NVDA), Johnson & Johnson (NYSE: JNJ), and Visa Inc (NYSE: V). For beginners, this fund offers exposure to some of the world's most profitable businesses with a single, low-cost investment.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

The Vanguard MSCI Index International Shares ETF could be worth considering. It is designed for investors who want broad international diversification beyond Australia. It invests across developed markets such as the United States, Europe, and Japan.

Its holdings include companies like Alphabet Inc (NASDAQ: GOOGL), Nestlé (SWX: NESN), Toyota Motor Corp (TYO: 7203), and LVMH Moët Hennessy Louis Vuitton (FRA: MOH).

Betashares Australian Quality ETF (ASX: AQLT)

The Betashares Australian Quality ETF takes a quality-focused approach to Australian shares. Rather than simply tracking the biggest companies, it targets businesses with strong balance sheets, reliable earnings, and solid cash flow.

Top holdings include Telstra Group Ltd (ASX: TLS), Macquarie Group Ltd (ASX: MQG), National Australia Bank Ltd (ASX: NAB), and Woodside Energy Group Ltd (ASX: WDS). This ETF could suit beginners who want a more selective take on the local market. It was recently recommended by analysts at Betashares.

Betashares Nasdaq 100 ETF (ASX: NDQ)

Finally, the Betashares Nasdaq 100 ETF adds a growth tilt to a beginner portfolio by tracking the Nasdaq-100 Index. It provides exposure to innovative companies shaping technology, healthcare, and consumer trends.

Holdings include Amazon.com (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Broadcom (NASDAQ: AVGO), and Netflix (NASDAQ: NFLX).

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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.

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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.

The post The best artificial intelligence (AI) stock to buy in 2026 (Hint: It's not Nvidia) appeared first on The Motley Fool Australia.

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.

The post Which AI chip stock is the better buy for 2026: Nvidia or Alphabet? appeared first on The Motley Fool Australia.