Alphabet Stock Price: the drivers, and its true standing against Nvidia & Meta

Julian Vance: The Algorithmic Analyst

[Generated Title]: Alphabet's AI Gambit: Can Google Overtake Nvidia as the World's Largest Company by 2026?

The financial press is buzzing about Alphabet's potential to become the world's largest company by 2026, fueled by its AI advancements, especially the Gemini 3.0 model. The claim hinges on Alphabet (NASDAQ:GOOG) surpassing Nvidia (NASDAQ:NVDA), currently a market darling. But let's dissect the numbers and the narrative.

The Hype vs. The Reality

The argument rests on a few key points: Berkshire Hathaway's investment in Alphabet, the alleged superiority of Gemini 3.0 over OpenAI's ChatGPT, and a potential deal to integrate Gemini with Apple (NASDAQ:AAPL) devices. The initial surge in Alphabet's stock price (more than 6% on one Monday alone) certainly grabbed headlines.

But is this sustainable, or just a temporary blip driven by hype? The article cites Marc Benioff's enthusiastic endorsement of Gemini, claiming he's "not going back" to ChatGPT. However, relying on anecdotal praise from a single executive – even a prominent one – isn't exactly a rigorous data point. How many other industry leaders have switched, and what are the quantifiable results of that switch? We simply don't know.

Furthermore, the claim that Alphabet is "cheap" at 31.5 times trailing price-to-earnings (P/E) requires context. While it's lower than some other tech stocks, it's still a premium valuation. It presumes that Gemini will generate substantial revenue growth to justify that multiple.

The Nvidia Factor: A Moat or a Puddle?

The real challenge for Alphabet isn't just about building a better AI model; it's about dethroning Nvidia. The article acknowledges Nvidia's current dominance but downplays the potential threat from Alphabet selling its custom chips (Tensor Processing Units, or TPUs) to companies like Meta Platforms (formerly Facebook).

The article mentions that Google sees a real business with its TPUs and is approaching other cloud customers in a play that could target as much as 10% of Nvidia's yearly revenue. Now, 10% is a significant chunk of change, but let's put that in perspective. Nvidia's revenue for fiscal year 2024 was $60.9 billion. Ten percent of that is roughly $6 billion. While not insignificant, it hardly represents a knockout blow, especially considering Nvidia is consistently rolling out new chip models every one to two years. Nvidia Sinks After Threat From Alphabet Emerges -- Is the Stock a Buy Now?

And this is the part of the analysis that I find genuinely puzzling. The article states that Nvidia's GPUs are used for more general-purpose training of large language models (LLMs), while TPUs are preferred for more specialized training of individualized tasks. If that's the case, then Alphabet isn't directly competing with Nvidia across the board. They're targeting a niche market.

Consider this: the article also mentions Nvidia's gross margin of 70.05%. That's an enormous advantage. Can Alphabet replicate that level of profitability while simultaneously undercutting Nvidia's prices to gain market share? It's a difficult balancing act.

(Parenthetical clarification: Gross margin reflects how much revenue remains after accounting for the direct costs associated with producing goods and services. A higher gross margin generally indicates greater profitability and efficiency.)

The Apple Wildcard

The potential deal to bring Gemini to Apple devices is intriguing, but it's also shrouded in uncertainty. The article frames it as a major win for Alphabet, suggesting that Google's AI business might leave its much-smaller rivals in the dust. But what are the terms of this deal? What percentage of revenue will Apple receive? Will it be exclusive, or will Apple continue to explore other AI options? The details are crucial, and they're currently missing.

Too Much Hype, Not Enough Hard Numbers

The article concludes that Alphabet has "too much AI momentum" and a "multiple still remains too low." But that's more of a feeling than a data-driven conclusion. The success of Alphabet's AI gambit hinges on several factors: the actual performance of Gemini 3.0, the competitive landscape (including potential advancements from OpenAI and others), and the ability to monetize its AI technology effectively. At this point, the claim that Alphabet will overtake Nvidia by 2026 feels premature.

The Crystal Ball is Still Cloudy