Microsoft(NASDAQ: MSFT) and Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) are two of the most prominent companies in the world. Alphabet is currently the third-largest, while Microsoft is in fourth place, although it’s a long way away from catching Alphabet’s market capitalization.
However, it wasn’t always this way. If you rewind to this time last year, the outlook on Alphabet’s stock was incredibly bearish. There were questions surrounding the future of the Google search engine due to illegal monopoly allegations, and there wasn’t a ton of confidence in Alphabet’s ability to deliver a leading AI model.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
Both of those questions were resolved in the second half of 2025, as Alphabet wasn’t required to make any massive changes to its current business to abide by the judge’s ruling, and Gemini emerged as one of the top generative AI models. This caused Alphabet’s stock to soar through the end of the year.
Microsoft’s stock has been beaten down lately and has reached unbelievable valuation levels, similar to what Alphabet went through last year. So, can Microsoft become the Alphabet of 2026? Let’s take a look.
Image source: Getty Images.
When you compare the situation each company is in, it’s clear that Alphabet’s was more dire. Alphabet gets the majority of its revenue and profits from the Google Search engine. Last year, the questions surrounding whether Google would be allowed to exist in its current format and if it could survive the challenge from generative AI weren’t clear. Alphabet may have ceased to exist in its present format if it hadn’t played its cards right, so the situation was not rosy.
Microsoft isn’t in nearly that bad of shape. If you look at Microsoft’s business, there really isn’t anything to be worried or concerned about. Microsoft isn’t directly competing in the AI arms race with a large language model; instead, it’s choosing to be an AI facilitator and offers many AI models on its cloud computing platform, Azure. It also owns about 27% of OpenAI, which could be a huge payoff if OpenAI goes public.
During Microsoft’s last quarter, Azure posted one of its best quarters ever, with revenue rising 39% year over year. Overall, Microsoft delivered one of its best growth rates the company has posted over the past decade.
There are really no red flags going on with Microsoft’s business, and it’s generally been proclaimed an overall winner in the AI buildout. However, that hasn’t stopped the market from selling off its stock.
One could argue that Microsoft’s stock was overpriced at its last all-time high. I’ll buy that notion, as it was trading at a fairly high operating price-to-earnings ratio.
I prefer this valuation metric for Microsoft’s stock, as it ignores one-time accounting effects and investment gains from OpenAI. From this standpoint, Microsoft is approaching decade-low valuation levels. Microsoft’s outlook now is just as good as it has been over the past decade, so while Microsoft was highly valued at the start of the sell-off, that’s no longer the case.
I think now is the perfect time to scoop up Microsoft’s shares, as its comeback should be rapid. I think it could be the Alphabet of 2026, and rebound to new all-time highs throughout the second half of the year. With the stock down around 35% from its all-time high, you’re being presented with a gift that rarely occurs, and investors should seize this once-in-a-decade investment opportunity. Alphabet was down 30% from its all-time high during the worst parts of its 2025 sell-off, so Microsoft’s comeback has the chance to be even bigger.
Before you buy stock in Microsoft, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $532,066!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,087,496!*
Now, it’s worth noting Stock Advisor’s total average return is 926% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Keithen Drury has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool has a disclosure policy.
