Nvidia and Alphabet Top Jefferies' "Magnificent Seven" Stocks for 2025: Should You Buy?

Alphabet Inc. (GOOGL, GOOG) and Nvidia Corporation (NVDA) have been ranked as the top two stocks among the "Magnificent Seven" by Jefferies, a leading global investment bank. This ranking is based on several quantitative measures, including growth, valuation, yield, earnings revisions, sell-side analyst sentiment, return on invested capital (ROIC), stock price momentum, and research and development (R&D) versus capital expenditures (capex) spending. With the AI sector booming and both companies well-positioned to capitalize on this trend, investors may be wondering if these stocks are worth buying. Let's dive into the reasons why these stocks are top picks and discuss their potential for 2025.



Nvidia Corporation (NVDA)

Nvidia is a dominant player in the graphics processing unit (GPU) market, with a nearly 80% market share. Its CUDA software platform has created a wide moat, making it the go-to choice for AI workloads. The company's strong growth, attractive valuation, and positive analyst sentiment have contributed to its top ranking.

* Strong growth: Nvidia is on pace to report its second consecutive year of triple-digit revenue increases, with analysts projecting more than 50% sales growth in 2025.
* Attractive valuation: Nvidia has a forward price-to-earnings ratio (P/E) below 33 times and a price/earnings-to-growth ratio (PEG) of 1, indicating that it is undervalued compared to its growth prospects.
* Positive analyst sentiment: Analysts have a positive outlook on Nvidia, with many rating its stock as a "buy" or "strong buy."

Nvidia's dominance in the GPU market, strong growth, and attractive valuation make it an attractive investment opportunity for 2025. However, investors should be aware of the potential risks associated with the AI sector, such as regulatory challenges and competition from other chip manufacturers.



Alphabet Inc. (GOOGL, GOOG)

Alphabet, the parent company of Google, has a strong presence in the cloud computing market and is well-positioned to benefit from the growing demand for AI infrastructure. Its cheap valuation, strong earnings growth, and AI initiatives make it an attractive investment opportunity.

* Cheap valuation: Alphabet has the lowest forward P/E ratio among the Magnificent Seven stocks, at 19.4, indicating that it may be undervalued.
* Strong earnings growth: Alphabet's earnings per share (EPS) grew by 37% year-over-year in the third quarter of 2024, driven by a 15% increase in revenue and a 34% increase in profits.
* AI initiatives: Alphabet's Gemini AI model and Google Cloud platform are significant drivers of the company's growth. Gemini is integrated into Google Search, providing users with AI-generated answers to their queries, while Google Cloud is growing rapidly, thanks to AI.

Alphabet's cheap valuation, strong earnings growth, and AI initiatives position it well for the future. However, investors should be cautious about the potential risks associated with the AI sector and the company's reliance on advertising revenue.

In conclusion, Nvidia and Alphabet are top picks among the "Magnificent Seven" stocks for 2025, thanks to their strong growth, attractive valuations, and positive analyst sentiment. However, investors should be aware of the potential risks associated with the AI sector and consider their own risk tolerance and investment goals before making a decision. As always, it is essential to conduct thorough research and consult with a financial advisor before making any investment decisions.