Over the past year, Alphabet, the parent company of Google, has transformed from a follower into a leader in the artificial intelligence sector. It has become the sole enterprise that dominates nearly every facet of this technology in the market. Now, it is approaching an even more ambitious goal—surpassing AI chip giant NVIDIA to claim the title of the world's most valuable public company.
Market data shows that Alphabet's market capitalization reached $4.8 trillion at Friday's close, while NVIDIA stood at $5.2 trillion, a gap of approximately $400 billion. In after-hours trading last Tuesday, the rankings of the two companies even briefly swapped places. Over the past six months, the valuation gap has narrowed significantly, with Alphabet's stock price soaring, including a 34% surge in April alone, marking its best monthly performance since 2004. For context, on October 31 last year, the difference was more pronounced: NVIDIA's market cap was $4.9 trillion, while Alphabet's was under $3.4 trillion. Since then, Alphabet's share price has surged 43%, whereas NVIDIA has risen only 6.3%—lagging behind both the S&P 500 and the tech-heavy Nasdaq 100 indices.
Many investors believe it is logical for Alphabet to eventually claim the top spot, as its business reaches into numerous critical segments of the technology industry and the AI ecosystem. "Alphabet holds significant positions in almost every corner of the AI ecosystem. Its comprehensive business portfolio places it in an excellent position to be the biggest winner from AI," said Luke O'Neill, Chief Investment Officer at CooksonPeirce Wealth Management, which holds shares in both Alphabet and NVIDIA.
While NVIDIA leads in manufacturing AI chips, a competing product from Alphabet—the Tensor Processing Unit (TPU)—is gaining increasing favor. Furthermore, Alphabet boasts extensive businesses like Google Search, Google Cloud, YouTube, and Waymo. Notably, Alphabet's Gemini AI model is considered among the industry's best, and the company is a significant investor in Anthropic, which develops another leading AI model, Claude.
"NVIDIA is a great company, but if AI spending slows, its earnings volatility could increase substantially," O'Neill stated. "In contrast, Alphabet's business is so diversified that if one segment underperforms, others can fill the gap. No company has a wider competitive moat than Alphabet; it seems to be 'the company' of the internet era. Therefore, it would be reasonable for it to become the most valuable company."
In Alphabet's history, it briefly surpassed Apple to become the world's most valuable company in early 2016. As of last Friday, Apple ranked third with a $4.3 trillion market cap, followed by Microsoft at $3.1 trillion and Amazon.com at $2.9 trillion.
The recent earnings season highlighted how Alphabet has emerged as a winner among tech giants. Its search and cloud businesses not only exceeded growth expectations, but its AI chips, the TPUs, have also become a key factor in attracting customers. Google CEO Sundar Pichai stated that Google Cloud customers will soon be able to run these chips in their own data centers.
Citizens analyst Andrew Boone wrote in a May 5th report to clients that he expects Alphabet to generate approximately $3 billion in revenue from TPU-related infrastructure in 2026, reaching $25 billion in 2027.
Divyaunsh Divatia, Research Analyst at Janus Henderson Investors, commented, "Alphabet's business lines are virtually all-encompassing. That's why investors feel so secure holding it—it has multiple paths to win in AI, from search and chips to cloud services, YouTube, and Gemini. Its revenue streams are incredibly broad. I remain bullish on NVIDIA; it's still a very strong company, but its limitation is being primarily a chip manufacturer."
Alphabet's rise marks a stunning reversal. Less than a year ago, investors were selling its shares as its core search engine business was seen as a potential victim of AI disruption. This began to change as Alphabet integrated AI into Google Search and Gemini became one of the most popular AI chatbots. Now, Wall Street analysts are rapidly raising their profit expectations. According to compiled data, consensus estimates for Alphabet's net profit this year have been raised by about 19% over the past month, with estimates for 2027 increased by over 7%.
"Google is one of the best-positioned AI companies because they own most of the technology stack," said Gene Munster, Managing Partner at Deepwater Asset Management. "Chips, models, infrastructure, and distribution. Most importantly, their profitability is excellent."
Following Alphabet's earnings report at the end of last month, J.P. Morgan analysts named the stock their "top pick" in the tech sector, citing its outstanding quarterly performance, accelerating growth, and a near-doubling of its cloud business backlog to $462 billion. Mizuho analysts also raised their price target for Google, believing current consensus estimates still significantly underestimate Google Cloud's revenue and operating profit for the next two years.
Risks and opportunities remain. Despite Wall Street's enthusiasm, sustaining Alphabet's exceptionally hot rally may not be easy. Currently, the average analyst price target for the stock over the next 12 months is around $422, about 5.4% above Friday's closing price. The stock has already gained 160% over the past 12 months.
Furthermore, Gemini and other top AI models face the risk of being overtaken by competitors. Alphabet's stock struggles last year illustrate how quickly market sentiment can shift in the AI era. Another major concern for some analysts is how much of Google's cloud backlog might come from Anthropic—a cash-burning, highly-valued startup that is raising tens of billions from Google and, in turn, spending most of that on Google's cloud services and TPUs.
D.A. Davidson analyst Gil Luria noted that this dynamic resembles what happened with Oracle. Oracle's stock surged after reporting a nearly 360% increase in its backlog last September, but it soon became apparent that much of it came from OpenAI. Luria sees concentration risk among major cloud providers. Microsoft, Oracle, Amazon.com, and Google report a combined cloud backlog approaching $2 trillion. Luria stated that nearly half of this can be traced back to commitments from OpenAI and Anthropic, both of which are seeking funding from the same pool of companies.
This increases the pressure on Google to deliver a stunning performance at the upcoming Google I/O conference, which opens in less than two weeks. Google needs to clarify its Gemini agent strategy and demonstrate it can generate sustainable revenue from the broader AI ecosystem.
Currently, Alphabet's forward price-to-earnings ratio is 28x. While far from the "sky-high valuations" of the dot-com bubble, it is significantly above the stock's 10-year average P/E of under 21x and near its highest level since 2008.
Regarding Google's current position, CooksonPeirce's O'Neill stated, "Even if we can no longer buy it at a very low price, it's not unreasonable to think it can maintain or even increase this valuation multiple. We wouldn't hesitate to buy it for new accounts." To illustrate, he quoted Warren Buffett: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." As an implicit endorsement, Buffett's Berkshire Hathaway purchased Alphabet shares last year—a rare tech investment for the famed value investor. "Even if it's no longer astonishingly cheap, it's still a fair price," O'Neill said. "It is unquestionably a wonderful company."
Argus analysts, in a post-earnings report, noted that "the risk from Alphabet's capital expenditure is evident." However, they maintained a "Buy" rating on the stock, viewing the company's ability to fund such expenditures compared to rivals like OpenAI as a "competitive advantage."
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