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Just a few months ago, analysts and investors were openly questioning Alphabet’s ((GOOGL - Free Report) ) future, arguing that large language models would cannibalize search and erode its core business. Today, the narrative has flipped. Alphabet now appears to have one of the leading LLMs in the market and is rapidly emerging as a major AI infrastructure provider through its TPU ecosystem. I noted the valuation disconnect at Alphabet here, and the company is now proving why that pessimism was premature.
The latest catalyst came as Meta Platforms ((META - Free Report) ) signaled plans to sign a major agreement to purchase and rent Alphabet TPUs. According to Reuters, some Google Cloud executives believe this strategy could allow Alphabet to capture up to 10% of Nvidia’s annual revenue, a meaningful shift in the AI hardware landscape. Meanwhile, Nvidia ((NVDA - Free Report) ) shares are sliding as Alphabet rallies on the news.
Alphabet also released its newest iteration of Gemini this week, and early reactions have been especially positive. Salesforce ((CRM - Free Report) ) CEO Marc Benioff, who had been using OpenAI’s models exclusively, said he will not be going back after adopting the latest Gemini, though Salesforce’s newly announced partnership with Alphabet certainly plays a role.
Alphabet’s stock had already been showing relative strength against both the broader market and Nvidia in recent months, and that outperformance has accelerated. The question now is whether Alphabet is positioned to become the ultimate AI winner.
Image Source: Zacks Investment Research
Alphabet’s Emergence as a Leading AI Stock
Alphabet’s AI position is strengthening as its TPU strategy and LLM performance begin to diverge meaningfully from competitors. Google’s custom TPUs are built for large scale machine learning pipelines, offering higher computational throughput per watt and better cost efficiency for training and inference as compute, power, and cooling become the industry’s biggest bottlenecks. These chips are deployed directly through Google Cloud, allowing enterprises to access large scale TPU pods without building their own specialized hardware stacks. This tight integration between Google’s hardware, software, and cloud infrastructure gives Alphabet a degree of vertical control that competitors struggle to match, enabling better performance, lower cost, and faster scaling across workloads.
At the same time, the newest Gemini model Gemini 3 shows significant gains in reasoning, mathematics, coding, multimodal tasks, and emerging agentic behaviors. With Google’s unmatched data scale and product footprint across Search, Maps, Ads, Android, and Workspace, Gemini can be embedded directly into products used by billions of people. This gives Alphabet a distribution advantage far beyond standalone chatbot usage and positions the company to integrate advanced AI deeply into both consumer and enterprise workflows.
Alphabet Shares Trade at a Discount to Nvidia
Alphabet currently trades at 30.3x forward earnings, above its five-year median of 22.6x, with analysts expecting earnings to grow 16.4% annually over the next three to five years. Nvidia, by comparison, trades at 41.8x forward earnings, below its five-year median of 50.8x, and is projected to grow earnings at an extraordinary 46.3% annual pace over the same period.
Both companies remain attractively valued relative to their growth rates, and Nvidia’s PEG ratio below 1 underscores how compelling its long-term setup still is. Now that sentiment has shifted sharply in Alphabet’s favor, contrarian investors may view current skepticism toward Nvidia the same way earlier pessimism toward Alphabet created opportunity.
Image Source: Zacks Investment Research
Should Investors Buy Shares in GOOGL or NVDA?
Alphabet and Nvidia now occupy different but complementary positions in the AI stack. While an epic competitive faceoff makes for a compelling media narrative, they are likely to both emerge as winners.
Alphabet is emerging as a leader in both LLM performance and cloud scale AI hardware, while Nvidia remains the dominant provider of accelerated compute. Neither company’s long-term thesis has weakened, and both continue to benefit from structural AI demand. For most investors, the question is not choosing one over the other, but determining the appropriate allocation to two companies shaping the next decade of technology.
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GOOGL vs. NVDA: Is There a New Leader in AI?
Just a few months ago, analysts and investors were openly questioning Alphabet’s ((GOOGL - Free Report) ) future, arguing that large language models would cannibalize search and erode its core business. Today, the narrative has flipped. Alphabet now appears to have one of the leading LLMs in the market and is rapidly emerging as a major AI infrastructure provider through its TPU ecosystem. I noted the valuation disconnect at Alphabet here, and the company is now proving why that pessimism was premature.
The latest catalyst came as Meta Platforms ((META - Free Report) ) signaled plans to sign a major agreement to purchase and rent Alphabet TPUs. According to Reuters, some Google Cloud executives believe this strategy could allow Alphabet to capture up to 10% of Nvidia’s annual revenue, a meaningful shift in the AI hardware landscape. Meanwhile, Nvidia ((NVDA - Free Report) ) shares are sliding as Alphabet rallies on the news.
Alphabet also released its newest iteration of Gemini this week, and early reactions have been especially positive. Salesforce ((CRM - Free Report) ) CEO Marc Benioff, who had been using OpenAI’s models exclusively, said he will not be going back after adopting the latest Gemini, though Salesforce’s newly announced partnership with Alphabet certainly plays a role.
Alphabet’s stock had already been showing relative strength against both the broader market and Nvidia in recent months, and that outperformance has accelerated. The question now is whether Alphabet is positioned to become the ultimate AI winner.
Image Source: Zacks Investment Research
Alphabet’s Emergence as a Leading AI Stock
Alphabet’s AI position is strengthening as its TPU strategy and LLM performance begin to diverge meaningfully from competitors. Google’s custom TPUs are built for large scale machine learning pipelines, offering higher computational throughput per watt and better cost efficiency for training and inference as compute, power, and cooling become the industry’s biggest bottlenecks. These chips are deployed directly through Google Cloud, allowing enterprises to access large scale TPU pods without building their own specialized hardware stacks. This tight integration between Google’s hardware, software, and cloud infrastructure gives Alphabet a degree of vertical control that competitors struggle to match, enabling better performance, lower cost, and faster scaling across workloads.
At the same time, the newest Gemini model Gemini 3 shows significant gains in reasoning, mathematics, coding, multimodal tasks, and emerging agentic behaviors. With Google’s unmatched data scale and product footprint across Search, Maps, Ads, Android, and Workspace, Gemini can be embedded directly into products used by billions of people. This gives Alphabet a distribution advantage far beyond standalone chatbot usage and positions the company to integrate advanced AI deeply into both consumer and enterprise workflows.
Alphabet Shares Trade at a Discount to Nvidia
Alphabet currently trades at 30.3x forward earnings, above its five-year median of 22.6x, with analysts expecting earnings to grow 16.4% annually over the next three to five years. Nvidia, by comparison, trades at 41.8x forward earnings, below its five-year median of 50.8x, and is projected to grow earnings at an extraordinary 46.3% annual pace over the same period.
Both companies remain attractively valued relative to their growth rates, and Nvidia’s PEG ratio below 1 underscores how compelling its long-term setup still is. Now that sentiment has shifted sharply in Alphabet’s favor, contrarian investors may view current skepticism toward Nvidia the same way earlier pessimism toward Alphabet created opportunity.
Image Source: Zacks Investment Research
Should Investors Buy Shares in GOOGL or NVDA?
Alphabet and Nvidia now occupy different but complementary positions in the AI stack. While an epic competitive faceoff makes for a compelling media narrative, they are likely to both emerge as winners.
Alphabet is emerging as a leader in both LLM performance and cloud scale AI hardware, while Nvidia remains the dominant provider of accelerated compute. Neither company’s long-term thesis has weakened, and both continue to benefit from structural AI demand. For most investors, the question is not choosing one over the other, but determining the appropriate allocation to two companies shaping the next decade of technology.