Valuations of Magnificent Seven Stocks Experience Significant Declines

While a rising tide lifts all boats, an ebbing tide causes boats to move lower. A similar scenario applies to the stock market. When primary market indexes decrease, most stocks follow suit. However, one positive aspect of this decline is that stocks become more attractively valued.

In 2025, this trend was evident with the so-called “Magnificent Seven” stocks. Each member of this once-high-flying group has suffered during the overall market sell-off, causing a drop in their valuations. Currently, Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) holds the title of the cheapest Magnificent Seven stock, but you may be surprised at which company ranks second-cheapest.

Current Valuation of the Magnificent Seven

Investors utilize various valuation metrics. The three most common are the trailing-12-month price-to-earnings (P/E) ratio, the forward P/E ratio, and the price-to-earnings-to-growth (PEG) ratio.

The following table compares the Magnificent Seven stocks across these metrics:

Data source: Yahoo! Finance. Valuations as of May 12, 2025.

As illustrated in the table, Alphabet ranks as the least expensive Magnificent Seven stock across all three valuation metrics. The tech giant’s share price has declined notably due to antitrust lawsuits and concerns that artificial intelligence (AI) could threaten its Google Search business.

Meta Platforms is the second-cheapest based on trailing and forward P/E ratios. This is significant since Meta has fared better than many other Magnificent Seven stocks amid this year’s market volatility.

Interestingly, Nvidia follows closely with the second-lowest PEG ratio after Alphabet. This metric is based on analysts’ five-year earnings growth projections. Nvidia’s shares have plummeted due to investor worries about the potential effects of tariffs and restrictions on AI chip exports to China.

Assessing Growth Projections for Alphabet and Nvidia

The PEG ratio is useful for evaluating growth stocks, but its reliability is contingent upon accurate future earnings growth estimates. If the projections for Alphabet and Nvidia are inaccurate, the PEG ratios may lose their value.

For Alphabet, the accuracy of analysts’ growth forecasts hinges on the outcome of federal antitrust lawsuits. The resolution remains uncertain; a worst-case scenario could involve forced divestitures, while a favorable outcome might lead to a win on appeal.

Another threat involves AI potentially decreasing Google Search advertising revenue. While this is possible, Google appears to be progressing well in integrating generative AI into its platform, potentially allowing it to adapt better than competitors.

For Nvidia, two assumptions weigh heavily on growth estimates: first, that the demand for AI chips maintains strong growth; second, that Nvidia remains ahead of growing competition. The former seems likely, given that we are still in the early phases of AI adoption.

The latter concern involves significant competition from well-funded rivals, including some of its customers, such as Google. However, Nvidia’s commitment to innovation may help it sustain its competitive edge.

Should Investors Consider These Affordable Stocks?

Every investment carries some risk, and Alphabet and Nvidia are no different. Investors should weigh the potential rewards against the risks when considering these stocks. Personally, I believe both stocks represent worthwhile opportunities.

Concerns regarding antitrust actions and AI’s impact on Google may be overstated. I anticipate AI to remain a significant advantage for Alphabet going forward. Additionally, Alphabet’s self-driving unit, Waymo, could emerge as a major growth driver in the coming decade.

Similarly, I hold an optimistic view on Nvidia’s long-term prospects. Breakthroughs in AI, possibly even leading to artificial general intelligence (AGI), could significantly increase the demand for GPUs. Nvidia’s ongoing investments in research and development should help it maintain market leadership.

Both Alphabet and Nvidia are currently the cheapest options among the Magnificent Seven stocks for substantial reasons. However, I consider them both smart choices for aggressive investors.

Is Investing $1,000 in Alphabet a Smart Move?

Before purchasing stock in Alphabet, consider this:

The analyst team from Motley Fool has identified the 10 best stocks for investment right now, and Alphabet is notably not included among them. The stocks that made the list are expected to yield substantial returns over the next few years.

Consider when Netflix was listed on December 17, 2004. If you had invested $1,000 then based on our recommendation, you would now own $614,911!* Similarly, if you had invested $1,000 in Nvidia on April 15, 2005, you’d currently have $714,958!*

Note that Stock Advisor has achieved an impressive total average return of 907%— a market outperformance compared to 163 %

*Stock Advisor returns as of May 12, 2025.

Disclosure: Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former spokesperson for Facebook, and John Mackey, former CEO of Whole Foods Market, are also on the board. Keith Speights holds positions in Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.