Microsoft’s stock is trading at a rare discount to Alphabet’s, as the ‘Magnificent Seven’ reshuffle intensifies

MarketWatch

by Christine Ji

February 19, 2026

AI-Generated Deep Dive Summary

Microsoft’s stock (MSFT) is trading at a rare discount to Alphabet’s (GOOGL, GOOG) in a significant shift from its historical dominance in the tech sector. Traditionally, Microsoft commanded a premium valuation due to its leadership in cloud computing, but recent developments have altered this dynamic. Investors are closely watching this change as it reflects broader shifts in the Big Tech landscape driven by advancements in artificial intelligence. The article highlights that Microsoft’s shares are now trading at a discount to Alphabet’s on a forward price-to-earnings basis, marking a notable reversal from years of Microsoft outperforming its rival. This shift has been fueled by Alphabet’s impressive stock performance over the past year, as well as investor concerns about Microsoft’s growth prospects. Specifically, disappointing results in Azure, Microsoft’s cloud division, and a broader sell-off in its software businesses have contributed to this decline. The changing valuation landscape underscores how the AI trade is reshaping traditional Big Tech pecking orders. Investors are increasingly focused on identifying winners and losers in this new era of technological transformation. While Microsoft once held a clear advantage due to its cloud dominance, Alphabet’s strong performance and perceived leadership in AI innovation have allowed it to take the lead. This shift matters for investors as it reflects the evolving nature of tech valuations and the growing importance of AI in driving market sentiment. The article suggests that the Big Tech pecking order is no longer set in stone, creating opportunities for those who can identify emerging trends and adapt their portfolios accordingly. For finance enthusiasts, this dynamic provides valuable insights into how market perceptions and technological advancements can rapidly alter stock valuations. As the AI-driven tech race intensifies, staying attuned to these shifts will be critical for investors seeking to capitalize on the next wave of winners.

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Originally published on MarketWatch on 2/19/2026