(Bloomberg) — Over the past year, Alphabet Inc. has gone from an artificial intelligence afterthought to the one firm in the market with dominant positions in nearly every aspect of the technology. Now it’s on the brink of overtaking AI chip giant Nvidia Corp. as the largest company in the world.
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“Alphabet holds a significant spot in almost every corner of the AI ecosystem, and the combination of everything it offers puts it in a prime position to be the biggest winner of AI,” said Luke O’Neill, chief investment officer at CooksonPeirce Wealth Management, which owns stakes in Alphabet and Nvidia.
Google’s parent closed Friday with a market capitalization of $4.8 trillion. Nvidia was below that level on Tuesday, but a three-day rally into the end of the week pushed it to $5.2 trillion.
The gap between the two has narrowed considerably over the past six months, as Alphabet shares have been on a tear, including a 34% gain in April, its best month since 2004. On Oct. 31, Nvidia’s market capitalization was $4.9 trillion and Alphabet’s was less than $3.4 trillion. Since then, Alphabet’s stock price has soared 43% while Nvidia’s is up just 6.3%, trailing the S&P 500 Index and the tech-heavy Nasdaq 100 Index.
Investors say it’s logical that Alphabet would ultimately seize the title of world’s largest company because its tentacles reach into so many important parts of the technology industry and the AI trade.
Nvidia may be the leader in building AI chips, but Alphabet has a rival product that’s gaining favor. It also owns a bunch of massive businesses like Google Search, Google Cloud, YouTube and Waymo. In addition, Alphabet’s Gemini AI model is considered one of the best in the industry, and the company is a significant investor in Anthropic, which has another leading model in Claude.
“Nvidia is a great company, but it has the potential to be far more cyclical should AI spending slow down,” O’Neill said. “Alphabet is so diversified that if one business falters, the others can pick up the slack. You can’t get a wider competitive moat than Alphabet has, and it seems like THE company of the internet era. So it would make sense if it were the biggest.”
Alphabet was the biggest stock in the market in early 2016 when it briefly surpassed Apple. As of Friday, Apple’s market cap is $4.3 trillion, followed by Microsoft Corp. at $3.1 trillion and Amazon.com Inc. at $2.9 trillion.
This earnings season offered a demonstration of how Alphabet is emerging as the standout winner among Big Tech. Not only did it post stronger-than-expected growth in its search and cloud businesses, but the company’s tensor processing unit, or TPU, AI chips have become a key attraction for customers. They’ll soon be available for Google Cloud clients to run in their own data centers, Chief Executive Officer Sundar Pichai said.
Alphabet is expected to generate about $3 billion of revenue from TPU-related infrastructure in 2026 and $25 billion in 2027, Citizens analyst Andrew Boone wrote in a note to clients on May 5.
‘Everything You Want’
“Alphabet just has everything you want, and that’s why everyone is so comfortable owning it, because it has so many ways to win within AI,” said Divyaunsh Divatia, research analyst at Janus Henderson Investors. “Between search, chips, cloud, YouTube and Gemini, it makes money from so many sources. I still like Nvidia, which remains a very strong company, but it is just a chipmaker.”
The ascent of Alphabet marks stunning a reversal. Less than a year ago, investors were dumping the stock as the company’s core search engine business was considered a potential victim of AI disruption. That started to change as Alphabet began incorporating AI into Google searches and Gemini became one of the most popular AI chatbots.
Now, analysts are rapidly increasing their earnings estimates. Over the past month, the consensus projection for Alphabet’s 2026 net income is up about 19%, and 2027 expectations have risen more than 7%, according to data compiled by Bloomberg.
That said, extending the rally in Alphabet shares could be difficult, despite Wall Street’s enthusiasm. The average analyst price target over the next 12 months is about $422, a 5.4% increase from Friday’s close. That represents quite a change for a stock that has gained 160% in the previous 12 months.
Of course, there’s a risk that Gemini and other top AI models could get leapfrogged by rivals. Alphabet’s stock struggles last year show how rapidly sentiment can shift in the AI era.
Alphabet shares trade at 28 times estimated earnings, which is hardly a dot-com-era nosebleed valuation. But it’s well above the stock’s 10-year average of less than 21, and right around the company’s highest multiple going back to 2008.
“Even if we’re not getting it for a song anymore, it isn’t unreasonable to think it can maintain or even grow this multiple,” CooksonPeirce’s O’Neill said. “We wouldn’t hesitate to buy it for new accounts.”
To further that point, he referenced a quote from Warren Buffett, who said it’s “far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” In an implicit endorsement, Buffett’s Berkshire Hathaway Inc. bought a stake in Alphabet last year, a rare tech investment for the famous value investor.
“Even if it isn’t screamingly cheap anymore, this is a fair price,” O’Neill said. “It is unquestionably a wonderful company.”
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