Nvidia is one of the best performing stocks in the current bull market. The stock is up more than 1,000% since the release of ChatGPT, which sparked artificial intelligence (AI) spending among major tech stocks. Nvidia has benefited immensely from growing spending on artificial intelligence infrastructure, as its GPUs are best-in-class for training large language models.
Despite its status as the largest company in the world with a market capitalization of around $4.5 trillion, analysts believe Nvidia could rise further in 2026. The average price target for the stock is $250, about 30% higher than the share price at the time of writing. That would make it a $6 trillion company.
But another AI leader appears poised to outperform the chipmaker in 2026 thanks to its momentum in hardware, software and real-world applications of AI. This is why I expect it Alphabet (GOOG 0.24%) (GOOGL 0.18%) outperform Nvidia next year.
Image source: Getty Images.
Challenging the AI leaders
Alphabet has made huge strides in artificial intelligence in 2025, and that should be reflected in continued financial strength in 2026.
The Google Cloud division saw revenue growth accelerate to 34% last quarter, while operating margin continued to grow to 24%. These trends should continue into 2026, as management reported a backlog of $155 billion at the end of the third quarter, up 46% year over year.
Alphabet is seeing particularly strong demand for its custom Tensor Processing Units (TPUs). The AI accelerator chips are a more cost-efficient alternative to Nvidia GPUs for AI training and inference. Anthropic plans to use TPUs for some of its workload starting in 2026, and Alphabet is reportedly in talks with Metaplatforms to use the chips and port the popular AI framework PyTorch to the hardware. The relative performance of TPUs versus Nvidia’s GPUs and other custom AI accelerators should continue to drive growth for Google Cloud into 2026, with significant margin improvements.
Meanwhile, Alphabet also saw strong relative performance for its major language models. Gemini 3.0, released in November, scored highly on most benchmark tests, outperforming the top models from both Anthropic and OpenAI at the time. The release prompted OpenAI CEO Sam Altman to declare a “code red” as the model outperformed GPT 5.1 and prompted more consumers to download Google’s Gemini app, which had 650 million monthly active users as of November.
Alphabet could also have a major customer for its LLM next year Apple will reportedly use Gemini for some of its new AI-powered Siri features starting next spring. The iPhone maker will pay $1 billion a year to license the model. Apple will run the model on its own servers, so it would pretty much be a win for Alphabet.
Today’s change
(-0.24%)$-0.75
Current price
$314.92
Key data points
Market capitalization
$3.8T
Day range
$313.73 -$316.50
Range of 52 weeks
$142.66 -$328.67
Volume
305K
Avg. full
23M
Gross margin
59.18%
Dividend yield
0.26%
Alphabet benefits from using its own AI innovations
Alphabet is not only innovating against its biggest competitors in this area; it can also apply these innovations in its own business.
As a major language model developer, it can benefit from its massive cloud computing business and TPU development. But Alphabet is also using that big language model to improve its core search engine, which remains a cash cow for the company. It also continues to refine various machine learning algorithms, improving ad placement and YouTube engagement.
In search, features such as AI overviews and AI mode have increased the number and range of searches users make. And because Google monetizes these searches at about the same rate as those without AI-powered results, this is a net positive for revenue. Over the past two years, the company has dramatically reduced the cost of generating AI summaries, improving profitability. Overall, Google Search revenue increased in the first three quarters of 2025, up 15% in the third quarter.
YouTube also saw revenue growth accelerate, with a 15% increase in the most recent quarter. AI features, such as tools that help with video editing and thumbnail creation, and identifying products that can be purchased in videos, have helped improve engagement and monetization.
Alphabet is also seeing progress with Waymo, its self-driving car company, which is part of the Other Bets segment. The robotaxi service completed 14 million trips in 2025, more than three times as many as the number of trips the year before. Management says it is on track to complete 1 million trips per week by the end of 2026 as it expands to 20 new cities. The company could be a major source of revenue growth if it scales up next year.
The value is there
With growth in hardware, software and its core businesses, Alphabet presents a diversified growth stock that trades at a good price. Investors can currently buy shares for less than 30 times forward earnings estimates. By comparison, you pay more than 40 times earnings for Nvidia shares.
Alphabet should experience strong earnings growth as its cloud computing business grows and its operating margin expands. It already generates tens of billions in cash every year, providing room to expand its share buyback program, further boosting earnings per share. As a result, paying less than 30 times earnings could be a bargain.
Meanwhile, Nvidia could struggle to build on its 2026 gains, especially as Google’s TPUs, competing GPUs and other companies’ custom AI accelerators make progress in gobbling up its market share. At the current price, it will have to exceed already high expectations to achieve returns as in recent years. It seems more likely that Alphabet will be the better performing stock in the coming year.
