Alphabet Shares Surge as AI Push Challenges Nvidia’s Chip Dominance

Alphabet Shares Surge: Alphabet Inc. shares are rallying, signalling a potential shake-up in the hierarchy of the world’s most valuable companies, as the tech giant makes strides in competing with Nvidia Corp.’s leading AI accelerators. Investor optimism has surged following strong reviews for Alphabet’s new Gemini AI model and growing demand for its tensor processing units (TPUs).

Shares of the Mountain View, California-based company jumped 2%, pushing its market capitalization to $3.9 trillion. Since mid-October, Alphabet has climbed 37%, adding approximately $1 trillion in value. The surge narrows the gap with Nvidia, currently valued at $4.2 trillion.

According to The Information, Meta Platforms Inc. is in talks to incorporate Google’s TPUs in its data centres by 2027, potentially renting additional chips from Alphabet’s cloud division. Such a deal could position TPUs as a viable alternative to Nvidia chips, which remain the standard for AI workloads in companies from Meta to OpenAI.

Nvidia has phenomenal growth potential, but the market is now more cautious about competition,” said Alexandra Morris, investment director at Skagen AS. “The narrative that Nvidia is the sole provider for AI data centres is changing.

Following Alphabet’s rally, Nvidia shares fell 5.1%, while Advanced Micro Devices (AMD), another AI chipmaker, dropped 7.8%. Alphabet’s stock now trades at 27 times forward earnings, up from its 20-year average, while Nvidia trades at 26 times forward earnings, below its decade-long average of 35 times.

While a partnership with Meta highlights potential long-term competition for Nvidia, Alphabet’s TPUs will need to prove their efficiency and computing power to gain widespread adoption in AI data centres. Analysts say the coming years will be critical in determining whether TPUs can reshape the AI chip market.

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