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Alphabet introduced two new AI chips (TPU 8tx and TPU 8i Max) on Monday, positioning itself as a stronger competitor to Nvidia in the semiconductor market. The stock rose 1.2% on the announcement, though gains were moderated by broader tech sector volatility. The chip development represents a significant growth opportunity for Alphabet as investors remain concerned about slowing search business revenue.
While both Nvidia and Alphabet are major AI winners, the article argues Alphabet may offer better future growth potential. Nvidia dominates AI accelerators with 96% YoY revenue growth but faces concentration risk with 70% of receivables from five customers and aggressive customer financing. Alphabet shows more diversified revenue streams, with Google Cloud growing 84% YoY, and has significant upside from Waymo's autonomous driving business expected to contribute meaningfully by 2027. Alphabet trades at a more attractive 15x earnings valuation.
Nvidia’s forward P/E has fallen to 11.8 versus Intel’s 33.3 as AI enthusiasm cools and a scandal involving CEO Jensen Huang weighs on the stock.
Broadcom (AVGO) trades at 16.6x forward earnings to Colgate's 24.5x, a discount more than one standard deviation below its four-year average.