"Whether we're talking about the so-called "Magnificent 7," "Magnificent 10," or whatever other grouping you can come up with, the reality is that just a few stocks drive the vast majority of the returns for large-cap indices such as the S&P 500. I don't expect this dynamic to change anytime soon, given the pivotal role technology plays in our lives, and the degree to which tech drives the overall economy."
"Ultimately, I think 2026 will turn out to be a year defined by quality. Investors will simply want more quality in their portfolios. In other words, less unprofitable tech and growth stocks, and more mature cash flow-producing gems like Alphabet. In my view, Alphabet provides the right mix of outsized growth driven by accelerating AI-driven earnings and its core search business, as well as a unique in-house chip stack that is starting to take shape as a monetizable business unit many didn't see coming."
"The company's latest earnings report tells a very bullish story in this regard. Alphabet's Q3 revenue surged to more than $102 billion - the first time ever. This represented 16% top line growth, a healthy number. But what I think is perhaps more important for long-term investors is the company's bottom-line earnings numbers, which came in 33% higher on a year-over-year basis."
Alphabet combines accelerating AI-driven earnings with a dominant core search business and an emerging in-house chip stack that can become a monetizable unit. Q3 revenue topped $102 billion for the first time, reflecting 16% top-line growth, while bottom-line earnings rose 33% year over year. Market returns remain concentrated in a small number of mega-cap tech firms, making exposure to high-quality cash-flowing companies important for matching broad market performance. Investors are likely to favor quality in 2026, shifting away from unprofitable growth names toward mature firms that offer operating leverage and sustainable cash generation.
Read at 24/7 Wall St.
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