The Magnificent Seven stocks have a long history of outperforming the stock market. These stocks make up large portions of the S&P 500 and the Nasdaq 100. Price movements in these seven stocks have a significant impact on the indices and investors’ funds.
However, some Magnificent Seven stocks have better growth prospects than others. While most of the Magnificent Seven stocks look like they will generate returns for many years, these are the top picks to consider out of Magnificent Seven stocks to buy.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has outperformed the stock market for many years and has earned consideration among Magnificent Seven stocks to buy. The stock is up by 14.4% year-to-date and has surged by 261% over the past five years. The tech giant trades at a 37.3 P/E ratio and offers a 0.70% yield.
Wall Street analysts say the stock can generate more returns for investors. The average price target implies a 14% gain. Microsoft is currently rated as a “Strong Buy” among 33 analysts.
The company’s cloud platform is a key revenue driver and represents more than half of the tech conglomerate’s total sales. Investors are also excited about the company’s foray into artificial intelligence. Copilot looks like a game changer that can help Microsoft expand into multiple industries. Copilot for Security looks likely to strengthen the firm’s market share in the cybersecurity industry.
Microsoft is a well-diversified company that has exposure to business software, gaming, advertising, social media and other verticals.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is another top Magnificent Seven stock to consider. After a shaky start due to some AI mishaps, investors are once again focusing on the company’s financials and long-term growth opportunities.
The advertising giant reported a successful quarter to start off 2024. Revenue increased by 15% year-over-year while net income soared by 57% year-over-year. Those solid results sparked a rally that has resulted in a 26% year-to-date gain. Shares are also up by 219% over the past five years.
Google Cloud continues to gain market share and grew at a faster rate this quarter than Microsoft’s cloud computing platform. Cloud computing represents more than 10% of the company’s total revenue.
Alphabet only trades at a 27.3 P/E ratio, which offers more safety than most Magnificent Seven stocks. It’s also a good valuation since the company recently reported exceptional net income growth. Many Wall Street analysts feel the same way about the stock. It’s rated as a “Strong Buy” with a projected 11% upside.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) continues to shock investors with impressive earnings reports that seem to top each other and has earned a top spot for consideration among Magnificent Seven stocks to buy. Nvidia started fiscal 2025 on a high note with its Q1 results. Revenue increased by 262% year-over-year while net income surged by 628% year-over-year.
The recent gains prompted Nvidia to announce a 10-for-1 stock split. This split has brought more attention to the stock and will increase options trading. Elevated options trading will lead to more volatility, which can further drive up the stock price.
However, Nvidia doesn’t need some additional options activity to generate meaningful returns for shareholders. The stock has done quite fine on its own with a 130% year-to-date return and an astonishing 3,100% return over the past five years. Nvidia is the AI chip leader and offers a gauge for how other AI stocks will perform. Strong financial growth combined with net profit margins above 50% makes the stock compelling for long-term investors. Shares currently trade at a 66.9 P/E ratio.
On this date of publication, Marc Guberti held long positions in MSFT, GOOG and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
