The “Magnificent Seven” technology stocks, which have historically outperformed the market, are struggling at the start of 2026, with only three managing to beat the S&P 500. In a surprising twist, the smaller player DigitalOcean (DOCN), with a market cap of $10 billion, has outperformed the giants by doubling its stock price this year. Competing in the cloud computing space, DigitalOcean is focusing on small and medium-sized businesses (SMBs) with affordable AI tools and services, carving out a niche that the larger players often overlook.

DigitalOcean’s revenue growth is accelerating, particularly in its AI offerings, which saw a remarkable 150% year-over-year increase in the fourth quarter. The company’s strategy to cater to “digital native enterprises” has proven lucrative, with significant revenue growth from high-spending clients. As demand for AI data centers continues to outstrip supply, DigitalOcean is well-positioned to capture more market share.

For investors, DigitalOcean presents an intriguing opportunity for cloud and AI exposure beyond the traditional giants. With projected revenue growth of 21% in 2026 and a forward price-to-sales ratio that could drop significantly, it may be an attractive addition for those looking to diversify their portfolios amidst the challenges faced by the Magnificent Seven.

Source: fool.com