Despite periods of turmoil in the stock market this year, most of the “Magnificent Seven” stocks have stayed hot. Those tech-focused megacaps have histories of generating strong earnings and free cash flows, and they’re all investing heavily in artificial intelligence (AI). Many investors expect them to be the primary beneficiaries of the AI revolution, which helps explain why their market caps have all now surpassed $1 trillion.

Despite their sheer size, some Wall Street analysts still foresee their shares making big moves upward. According to certain analysts, these two Magnificent Seven stocks could rise by 31% and 19%, respectively, over the next year.

Image source: Getty Images.

Microsoft: Reaping the rewards of AI investment

There was a time when investors had questions about Microsoft‘s (MSFT -1.01%) investments in artificial intelligence. But recent quarters have largely put those doubts to rest, and Microsoft’s stock has risen about 20% so far this year. In the company’s fiscal 2025 fourth quarter (which ended June 30), Microsoft’s Azure and other cloud services division, which houses a lot of its AI offerings, generated astounding revenue growth of 39% year over year.

“Cloud and AI is the driving force of business transformation across every industry and sector,” said CEO Satya Nadella in Microsoft’s latest earnings release.

Following the earnings release, Truist Securities analyst Joel P. Fishbein Jr. issued a research report, maintaining a buy rating on Microsoft and raising his price target on the stock to $675, forecasting a gain of about 31% over the next 12 months. Fishbein thinks the tech giant will continue to see strong growth from its cloud business, as well as tailwinds in the broader AI ecosystem. “Sustained strong cloud growth at scale & growing AI demand capture can lead to at least low teens double-digit rev, profit & CF (cash flow) growth over an extended period, while consistently returning cash via divs/repurchases,” he wrote.

Microsoft has been able to monetize AI by integrating AI models from OpenAI and charging clients that use these templates. Additionally, Microsoft sells its Azure clients enterprise AI tools through Azure Foundry that allow them to build and implement AI chat, conversational AI, and AI agents, among other tools. Further growth is likely as AI begins to spread to more parts of the economy and different types of businesses across sectors.

Though it can be hard to gauge how much more room for growth a company with a more than $3 trillion market cap might have, I don’t have any issue recommending Microsoft to long-term investors. In addition to AI, the company has a tremendous slate of businesses, including its popular suite of office productivity software, its traditional cloud business, video games, and social media platforms. Plus, Microsoft is one of the only companies with a debt rating higher than the U.S. government.

Alphabet: Overcoming challenges all year

It’s been a tremendously volatile year for Alphabet (GOOG 0.16%) (GOOGL 0.10%). Toward the end of 2024, a federal judge sided with the Department of Justice in a lawsuit, agreeing that the Google parent had employed monopolistic practices to protect its domination of the search engine space, as well as in its digital advertising practices.

The Justice Department then asked U.S. District Judge Amit Mehta to make Alphabet divest itself of its Google Chrome unit, a key element of the company’s search business, which drives over half of Alphabet’s revenue. But recently, Judge Mehta ruled that the company would not have to do this.

Furthermore, Mehta said Alphabet can continue to pay distributors like Apple to make Google the default search engine on their web browsers. Alphabet reportedly paid Apple over $20 billion in 2022 to make it the default engine on the Safari browser, which is installed standard on all iPhones. However, Mehta said that exclusive contracts will not be allowed and that Google would have to share some of its search data with rivals. Overall, investors considered this a positive outcome for Alphabet.

Many were also concerned earlier this year that AI chatbots like OpenAI’s ChatGPT might significantly cut into Google’s search business. However, the AI Overviews results powered by Google Gemini that now top the responses to most Google search queries appear to be making progress and meeting the needs of consumers. Evercore ISI analyst Mark Mahaney said the judge’s ruling had removed a clear overhang on the stock, which will allow investors to focus on the company’s fundamentals.

“What we see is a Core Catalyst, with Google Search revenue growth likely to remain DD% [double digit] for the foreseeable future,” Mahaney wrote in a research note. While generative AI  will undoubtedly continue to provide competition, Mahaney believes Google’s ability to innovate will keep its search engine competitive and allow the company to continue to generate solid growth. His new 12-month price target on Alphabet stock is $300, implying about 19% upside from current levels.

I largely agree with Mahaney, although I think investors should monitor competition from the likes of ChatGPT. But Alphabet also has many other strong and growing businesses, among them its cloud business, YouTube, its Waymo self-driving vehicle unit, and even its own AI chip design business. Even after its big run-up, Alphabet still trades at about 24 times forward earnings. Given that the company’s relevance is unlikely to fade any time soon, at that level, it looks like a good long-term buy.

Google’s parent, Alphabet, reached a $3 trillion market valuation for the first time on Monday, entrenching its place in the ranks of the world’s most valuable companies and signaling the central role of artificial intelligence (AI) in propelling Big Tech’s dominance. In Google’s case, some legal clarity around its monopoly status also helped.

The stocks of Google parent Alphabet (GOOGL 3.10%) (GOOG 2.98%) and Meta Platforms (META 2.04%) shot higher in Friday trading. Although most stocks rose because the Federal Reserve strongly hinted at a September cut in interest rates, another factor was likely the announcement of Meta’s cloud deal with Google, as reported by The Information.

Considering the $10 billion size of the deal, one has to assume it is critical, particularly to Alphabet. Still, considering the state of the artificial intelligence (AI) stock, it could serve as a much-needed catalyst for the company’s investors. Here’s why.

Image source: Getty Images.

Terms of the partnership

Under the terms of the deal, Meta will pay Google $10 billion over six years. In exchange, it will receive access to Google Cloud’s storage, server, and networking services, along with other products.

Meta has previously relied on Amazon‘s Amazon Web Services (AWS) and Microsoft‘s Azure for such services. The deal does not necessarily mean it will deal less with these companies. More likely, it speaks to Meta’s insatiable demand for cloud infrastructure as it seeks to become a major player in the AI space.

Additionally, Meta and Alphabet are each other’s largest competitors in the digital advertising market. And in the first half of 2025, 98% of Meta’s revenue came from digital ads. Hence, in a sense, it is remarkable that these two would become partners in a different business.

How it helps Alphabet

However, in another sense, this is a huge step forward for Alphabet’s future. In the first half of this year, Alphabet earned 74% of its revenue from the digital ad market, down from 76% in the same period in 2024. This is also by design, as Alphabet has purchased dozens of businesses unrelated to the digital ad market in its efforts to transition into a more diversified technology enterprise.

So far, Google Cloud is the only one of these enterprises to appear in Alphabet’s financials. It accounted for 14% of Alphabet’s revenue in the first two quarters of 2025, up from 12% in the same year-ago period.

Additionally, Google Cloud generated over $49 billion in revenue over the trailing 12 months, implying the $10 billion from Meta over six years will make up a relatively small portion of Google Cloud’s business.

Nonetheless, the deal serves as a vote of confidence for Alphabet’s cloud business, one that continues to lag AWS and Azure in terms of market share.

Image source: Statista. Y-o-y = year over year.

The investor perspective is also crucial. Over the last year, Alphabet stock has outpaced the total returns of the S&P 500 by a significant but not eye-popping margin. However, it may help that Alphabet’s price-to-earnings (P/E) ratio of 22 is the lowest among “Magnificent Seven” stocks. Hence, the Meta deal could prompt investors to look more favorably upon that earnings multiple.

GOOGL Total Return Level data by YCharts.

Furthermore, if the Meta deal prompts other companies to do more business with Google Cloud, it could provide a boost to its market share and, by extension, Alphabet stock.

The Meta deal and Alphabet stock

Ultimately, Meta’s deal with Google Cloud will more than likely take Alphabet stock a leg higher, but investors should expect the effects to be more indirect. Indeed, the deal is remarkable in that it serves as a boost for third-place Google Cloud and is notable since the two companies are direct competitors in each other’s largest enterprises.

Although $10 billion in added business over six years is substantial, Google Cloud generated $49 billion over the last 12 months. Thus, it is a significant but not game-changing boost to the enterprise.

However, the deal may make Google Cloud more attractive to prospective customers, and the low P/E ratio could attract more investors to Alphabet. In the end, those could become the more significant benefits of the deal.

The first half of the year was a difficult one for many artificial intelligence (AI) stocks as investors fled high-growth players. The reason? They worried that President Donald Trump’s import tariff plan might lift prices for a wide range of goods — and this could hurt the consumer’s buying power, weigh on corporate expenses, and eventually stop growth companies in their tracks.

As a result, the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite slid in April, but in recent weeks, investor sentiment has improved. Initial trade deals with the U.K. and China helped, as did commentary from tech giants, who reiterated capital spending plans, suggesting that potential tariffs wouldn’t stop their momentum.

Though the tariff situation remains uncertain, the market’s more sanguine view, as well as certain companies’ solid long-term outlooks, make now a fantastic time to get in on AI stocks. And two in particular may be well positioned to soar in the second half.

Image source: Getty Images.

1. Amazon

The best word to describe Amazon‘s (AMZN 1.26%) stock performance in the first half is “lackluster.” The company actually finished the half at the same level it started, posting a 0% move for the period. Investors may have been concerned about Amazon getting hit by tariffs in two ways: Higher prices may weigh on e-commerce demand and revenue, and Amazon Web Services (AWS) might see customers rein in spending.

But there’s reason to believe those problems won’t occur. Amazon has a wide selection of products and sourcing countries, making it easy for the company to be nimble in an import tariff environment. As for AWS, so far, the strong spending message from companies suggests customers are sticking by their AI strategies and aren’t slowing down.

I also like the idea that Amazon has proven its ability to handle difficult environments. A few years ago, when inflation was soaring, the company revamped its cost structure. That move had immediate results, helping Amazon recover from its first annual loss in about a decade. This new cost structure should also make it easier for the company to overcome future pressures on costs, such as import tariffs.

AMZN Net Income (Annual) data by YCharts.

Finally, AI infrastructure buildout continues, and AWS, as the world’s biggest cloud company, should benefit as its customers seek compute and other AI solutions. This should keep Amazon’s billion-dollar earnings growing. And that, as well as a valuation of 35 times forward earnings estimates, down from more than 40 times late last year, could prompt investors to pile into this stock in the second half.

2. Alphabet

Alphabet (GOOG 1.47%) (GOOGL 1.46%) stock slipped more than 6% in the first half of the year amid the general uncertainties I mentioned above. It’s on the rebound from its lowest point in April, having gained more than 20% since, and I think the stock will move considerably higher in the months to come amid the improving sentiment for growth players.

Like Amazon, Alphabet is a market leader that has proven itself over time, generating significant growth and billions of dollars in earnings. This is thanks to the company’s Google platform and its cloud computing business, Google Cloud. The Google platform brings in revenue through advertising, as advertisers flock to the world’s internet search leader to reach us where they know we’ll be, and Google Cloud’s wide range of services is also a billion-dollar revenue driver.

And AI is at the center of the story right now. The company has developed its own large language model (LLM), and this is fueling better search experiences for users and more targeted ad campaigns for advertisers. Both of these elements should keep advertisers spending, and even increasing spending, on Google.

As for Google Cloud, AI products and services have been driving growth, and the unit reported a 28% increase in revenue to more than $12 billion in the latest quarter. This momentum should continue as cloud customers develop and scale up their AI programs, as we’re still in the early days of the AI story.

What may particularly attract investors to Alphabet right now is its dirt-cheap valuation, trading for only 18 times forward earnings estimates. And that could help this top AI stock to roar higher in the second half of 2025.