Looking back over the past decade and beyond, I don’t think there are many folks out there who would deny just how impressive Tesla‘s success has been. This innovative business, led by polarizing CEO Elon Musk, disrupted the global auto industry with its electric vehicles (EVs).

While the EV stock trades 32% below its peak (as of June 10), that’s still a gain of 1,810% in the past 10 years. That long-term performance made it one of the world’s largest tech companies, which is why Bank of America analyst Michael Hartnett gave it a spot in the “Magnificent Seven” when he introduced the idea of the group in 2023. However, I think it’s time to swap the EV maker out of this unofficial grouping and replace it with the more-deserving Netflix (NFLX -0.24%).

Image source: Getty Images.

Tesla’s struggles are hard to ignore

Over the years, Tesla shareholders grew used to seeing the company register jaw-dropping sales growth. The picture isn’t so rosy anymore, though. Its automotive revenue declined 20% year over year in Q1. In 2024, it reported its first-ever year-over-year drop in deliveries. And the company’s profitability has continued to slide as higher interest rates and a more competitive environment have put downward pressure on demand for its vehicles.

Musk’s push in the political arena might at first have been viewed positively by some investors, as he was positioning himself to have more influence in Washington, D.C., which could have benefited Tesla from a regulatory perspective. But both his time in President Donald Trump’s inner circle and his more recent exit from politics, as well as his highly public spat with Trump, have been huge distractions that have certainly damaged Tesla’s brand instead.

It’s safe to say that a company that was once in the fast lane is now stuck in traffic. Tesla will have a lot of work to do in order to get back to its prior glory.

Netflix just keeps winning

While Tesla faces a battle to get itself back on track, Netflix continues to flourish. The streaming stock is up 1,200% in the last decade. The company added 41 million net new customers in 2024, bringing its total to nearly 302 million at year’s end. While Netflix chose to stop publicly reporting the number of subscribers it has starting this year, it did increase revenue by 12.5% year over year in the first quarter.

It might seem like this streaming platform has saturated its market. However, co-CEO Greg Peters believes there are still “hundreds of millions of folks to sign up.” By continuing to focus on creating compelling content offerings all over the world, Netflix is in a position to keep its expansion going. Wall Street’s consensus analyst estimates are for its revenue to rise at a compound annual rate of 12.3% between 2024 and 2027.

The streaming industry, like the automotive market, is extremely competitive. Netflix co-founder and former CEO Reed Hastings previously said that he counts sleep among the company’s key competitors. I don’t believe this was a stretch. Netflix goes up against all the other activities consumers can do when it’s time to wind down and relax.

But to be more specific, people have an almost unlimited number of viewing options at their fingertips today. Netflix is in the lead, though. Data from Nielsen shows that Netflix commanded 7.5% of video viewing time in the U.S. in April, only behind YouTube, which isn’t necessarily an apples-to-apples comparison due to the latter largely featuring user-generated content.

With its massive subscriber base, and trailing 12-month revenue of $40 billion, Netflix has the financial strength to spend a lot on content and marketing. And it’s still able to bring in billions in free cash flow each year.

It’s important to highlight that the “Magnificent Seven” is not an official index like the S&P 500 is. However, with each passing quarter, Netflix continues to make the case that it deserves to be mentioned with the tech giants in that group. Given the streaming pioneer’s ongoing success, it belongs in that exclusive club instead of Tesla.

Microsoft (MSFT 1.22%) hit a new all-time high early on Wednesday — making it the only company at the moment valued at a market cap over $3.5 trillion.

Investors wondering which “Magnificent Seven” stock could be next to have come to the right place. Here’s the case for why Meta Platforms (META -0.15%) and Nvidia (NVDA 1.45%) could follow in Microsoft’s footsteps and soon hit all-time highs, and why both stocks are worth buying now.

Image source: Getty Images.

Within striking distance

The simplest reason why Meta and Nvidia could quickly follow Microsoft and hit all-time highs is because both stocks are the next-closest Magnificent Seven members to their all-time highs.

Data by YCharts.

Meta and Nvidia may be close to making new highs, but it’s a mistake to buy a stock just to make a quick profit. A better approach is to invest with a long-term mindset, and Microsoft, Meta, and Nvidia have the qualities necessary to be excellent investments for years to come.

Earnings evolution

Microsoft, Meta, and Nvidia may operate in different industries, but they have many similarities as businesses. All three companies have done a masterful job carving out high-margin operations in competitive, growing industries.

Microsoft has transformed its business from legacy software and hardware to the No. 2 cloud computing player behind Amazon Web Services (AWS). It has also leveraged artificial intelligence (AI) across its operations to boost efficiency and grow profit margins.

Instagram became such a prevalent social media app that Facebook changed its name to Meta Platforms to showcase the company’s Family of Apps and virtual and augmented reality investments. Instagram has undergone a makeover from a stagnant, gallery-like interface centered around images to a dynamic platform with videos and an engaged community tailor-made for viral content. Instagram has helped Meta expand its revenue and margins and stay highly competitive with other short-form video options, like TikTok.

It wasn’t long ago that Nvidia heavily depended on its graphics segment, which includes sales for gaming, PCs, visualization, and software for internet applications. But now, the company’s compute and networking segment makes up the vast majority of operating income and is the company’s main growth driver, as customers demand supercomputing platforms that can handle increasingly complex and large data sets and simulations.

In Nvidia’s latest quarter, which was the three months ended April 27, compute and networking brought in $39.6 billion in revenue and $22.1 billion in operating income, compared to $4.5 billion in revenue for graphics and $1.6 billion in operating income. For context, Nvidia’s compute and networking for the same quarter just one year ago was $22.7 billion and $17.1 billion in operating income — illustrating the segment’s breakneck growth rate.

In sum, Microsoft, Meta Platforms, and Nvidia have undergone considerable transformations in recent years. Newer business segments are arguably the most valuable part of each company — cloud for Microsoft, Instagram for Meta, and sales for data centers for Nvidia.

Fair prices for exceptional businesses

When a company evolves, it can take the market time to properly value the new business. Microsoft, Meta, and Nvidia crushed the S&P 500 (^GSPC 0.38%) over the last five to 10 years, especially Meta and Nvidia. And yet, because all three companies are growing profits from their legacy business segments and new markets, their valuations are still reasonable.

Microsoft and Meta both have slightly higher price-to-earnings (P/E) ratios than their five-year median levels. Nvidia’s P/E ratio is down considerably since the company wasn’t as profitable a few years ago.

Data by YCharts.

As you can see in the chart above, expectations for Microsoft and Meta’s forward earnings are fairly bleak, since their P/E ratios are just a little higher than their forward P/Es, suggesting low earnings growth. Meanwhile, Nvidia is still expected to grow quickly (but not as quickly as in the last few years), so its forward P/E is a lot less than its present P/E.

Still, all three stocks may look expensive at first glance compared to the S&P 500, which has a forward P/E of just 21.7. But given the industry-leading positions of all three companies in rapidly growing industries, their valuations are arguably justified, especially relative to other hot stocks.

Walmart (WMT -1.03%) and Costco Wholesale (COST 0.59%) — the two most valuable companies in the consumer staples sector — trade up 139% and 115%, respectively, over the last three years compared to a 46% gain in the S&P 500. But they haven’t backed up those gains with considerable earnings growth — leading to a valuation expansion for both stocks. Walmart has a sky-high P/E ratio of 41.6, and Costco is even more expensive, at 57 times earnings.

In an era when investors pay a premium price for high-quality companies across stock market sectors, Microsoft, Meta, and Nvidia aren’t that expensive compared to many other names.

Financial stability

Another similarity between Microsoft, Meta, and Nvidia is that all three companies have impeccable balance sheets.

Microsoft finished its latest quarter with $79.6 billion in cash, cash equivalents, and short-term investments, compared to just $39.9 billion in long-term debt.

In its latest quarter, Meta reported $70.2 billion in cash, cash equivalents, and marketable securities, compared to just $28.8 billion in long-term debt.

Nvidia had $53.7 billion in cash, cash equivalents, and marketable securities, compared to just $8.5 billion in long-term debt on its balance sheet in its latest quarter.

Each company has at least twice as much cash, cash equivalents, and investments as long-term debt, providing an elite level of financial health. Having a strong balance sheet can come in clutch during an economic downturn, a slowdown in a key end market, or a compelling acquisition opportunity.

Cut from the same cloth

Microsoft, Meta, and Nvidia are ultra-elite Magnificent Seven companies due to their established and legacy business units, opportunities in newer industries, reasonable valuations, and balance sheet strengths. There are the kinds of businesses investors can be confident buying and holding over a period of at least three to five years.

It’s never easy buying a stock near an all-time high. But if a company continues boosting its earnings year after year, it can grow into its valuation.

This concept is why it’s better for long-term investors to focus on quality companies than trying to get a weak business for an inexpensive price. Or, as Warren Buffett famously said, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

I’d say that Microsoft, Meta, and Nvidia are three wonderful companies at fair prices, making them great candidates for investors to load up on in June.

The “Magnificent Seven” stocks have been incredibly successful stock picks, but most have sold off so far in 2025, some heavily. Their lower prices are intriguing, but I don’t think all of them make great buys right now. While five look great, I’m avoiding two. 

GOOGL data by YCharts

The two that I’m avoiding

I wouldn’t buy any Apple (NASDAQ: AAPL) or Tesla (NASDAQ: TSLA) stock right now. These two companies have problems.

Apple hasn’t realized a game-changing or innovative product in some time, and has failed to grow its revenue meaningfully over the past three years. It finally surpassed the trailing-12-month total set in the fall of 2022 this past quarter, and Wall Street analysts project only 4.6% and 8% growth in FY 2025 and FY 2026, respectively. On top of that, Apple has a premium valuation compared to the other stocks (only Amazon and Tesla trade at a higher forward price-to-earnings ratio, and Microsoft’s is equal). As a result, I want to avoid Apple.

Tesla is having some brand issues, which can be directly tied to CEO Elon Musk’s involvement in President Donald Trump’s administration. Whether you agree with his actions or not, it’s indisputable that some Tesla owners and potential buyers are angry. Until Tesla gets its brand image straightened out, I’ll probably avoid the stock.

The remaining five stocks on this list are Nvidia (NVDA -0.66%), Microsoft (MSFT 0.45%), Alphabet (GOOG 1.61%) (GOOGL 1.66%), Meta Platforms (META 1.17%), and Amazon (AMZN 1.18%), and each looks intriguing at its current price tag.

AI has been a huge boom for several of these businesses

Following the recent sell-off, these five stocks are down 15%-20% from their highs. Alongside that, each is trading near relative valuation lows from the past three years.

GOOGL data by YCharts

GOOGL PE Ratio (Forward) data by YCharts

Alphabet is by far the cheapest at 19 times forward earnings — a metric that uses analyst estimates — which prices it well below the S&P 500‘s (SNPINDEX: ^GSPC) 20.5 forward P/E. I believe growth rates that are projected to be above market pace for the next few years make Alphabet a no-brainer buy.

The other four stocks trade at a premium to the S&P 500, so they need convincing growth estimates to justify that premium to me.

While Nvidia is one of the more expensive stocks of the five, it’s also projected to grow the fastest. Wall Street analysts project that Nvidia will grow its revenue by 57% in FY 2026 (the current year) and 23% in the next fiscal year, far outpacing the 10% the S&P 500 averages.

On top of that, Nvidia CEO Jensen Huang sees a path to $1 trillion in data center revenue by 2028, a potentially magnificent boon for his company, making today’s stock price look like an absolute steal.

Microsoft and Amazon also make for great buys (and Alphabet as well) because of their exposure to cloud computing. Cloud computing is a key beneficiary of the AI arms race, as many companies don’t have the computing power necessary to run AI models, so they rent that power from a cloud computing provider.

Amazon Web Services (AWS), Azure (Microsoft’s platform), and Google Cloud (Alphabet’s platform) are the largest cloud computing providers by market share and will benefit from a huge spending wave that’s expected to expand the cloud computing market opportunity from $752 billion in 2024 to $2.4 trillion in 2030. This is monstrous growth and could easily propel these stocks into market-beating territory.

Last on this list is Meta, which has been a huge spender in the AI arms race. Meta uses AI to maintain its dominance in the social media space, where it generates nearly all of its revenue from ads on those platforms. Meta also has several exciting projects that it’s working on in its Reality Labs division. Meta’s revenue could take off if a new sales stream emerges should any of these become a hit product. Even without that, its revenue is expected to increase by 15% in 2025 and 14% in 2026, which makes it a great stock to own if you’re trying to beat the market.

The “Magnificent Seven” stocks are still relevant in today’s market, but you need to be selective about which ones you buy. The latest market sell-off is a great chance to scoop up some of them on sale, and I’m willing to bet that at least some them will beat the market over the next three to five years.

If you’re a fan of Westerns, you may think of the silver screen when someone says The Magnificent Seven — a film by the name came out in 1960. But the name also refers to a group of stocks that have powered index gains through this bull market so far. Each of these companies is involved in the industry of technology, and they also have invested in the hottest tech area of all in recent times: artificial intelligence (AI).

These seven players have seen their shares climb along with revenue — and investors are generally optimistic about these companies’ long-term prospects too. After this top performance, with most Magnificent Seven players advancing in the double digits over the past year, you may expect their valuations to be sky-high. But that isn’t necessarily the case. Let’s meet the cheapest stock in the Magnificent Seven right now — and consider whether it’s a buy.

Image source: Getty Images.

Investors have been buying the Magnificent Seven

First, though, a quick look at the members of this elite list of movers. And they are: Alphabet (GOOG -0.57%) (GOOGL -0.79%), Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. Each of these stocks, except Microsoft, has climbed in the double digits over the past year. This is as investors piled into companies developing or using AI products and services with the idea that this technology could generate explosive growth over time.

Some of these players already are seeing the benefits. For example, Nvidia, the top maker of AI chips, has seen revenue climb in the double or triple digits quarter after quarter. And Amazon, the world’s top cloud services provider, says its cloud unit already is delivering an annual revenue run rate of $115 billion thanks to its AI offerings.

Now, let’s turn to the question of valuations. Certain members of the Magnificent Seven trade at levels some investors may consider high — such as Tesla, trading for more than 120 times forward earnings estimates. But one particular Magnificent Seven stock, in spite of climbing 31% over the past year, today trades for only 20 times forward earnings estimates — the cheapest of the group by this measure.

I’m talking about Alphabet, owner of the world’s most popular search engine, Google, and the high-growth cloud services provider, Google Cloud. Though Alphabet’s stock has climbed, earnings too have advanced recently and over the long term. This is thanks to the company’s dominance in search and the fact that this leads to strong revenue growth — advertisers pay to advertise their products and services across Google, where they know they can easily reach us.

Alphabet’s commitment to AI

Though Alphabet dominates the search market, with about 90% share, and has proved its ability to grow revenue over time, the company hasn’t been sitting still. Instead, it’s invested heavily in AI — and continues to do so — to boost its future revenue opportunities. Alphabet’s large language model, Gemini, is used across its business, from improving search results and the advertising experience for advertisers to serving the customers of its cloud business.

In the recent quarter, Alphabet said demand for its AI services is growing, with cloud customers using more than eight times the compute capacity for tasks like training and inferencing than they did a year and a half ago. The company continues to increase investment in AI so that it can serve increasing demand. It announced $75 billion in capital spending for this year to support technical infrastructure such as servers, data centers, and networking.

A potentially $1 trillion market

This spending may not please investors right at this moment, but it’s important to look at the situation through a long-term lens. Today’s $200 billion AI market is expected to reach more than $1 trillion by the end of the decade, and companies that position themselves well now are most likely to benefit. So I see Alphabet’s move as a wise one from that perspective.

One element that may weigh on Alphabet is its ongoing antitrust battle. A U.S. district judge ruled last year that Alphabet has illegally used its search position to crush competition — but the company plans to appeal, and considering past antitrust cases in the field, I’m not overly worried about the final outcome.

Now, let’s get back to our question: Alphabet is the cheapest of the Magnificent Seven now. But is it a buy? I say yes. Even though the antitrust case may represent some headwinds, overall, Alphabet’s leadership in its markets, its earnings track record, and its future prospects thanks to smart AI investment and innovation make me optimistic about the company — and stock performance over the long term.