Nvidia (NVDA +1.31%) has been one of the most successful growth stocks of the past decade. The AI chipmaker has rallied by more than 20,000% during that stretch, but investors may want to look at smaller companies for higher long-term returns.
Sure, every publicly traded company is smaller than Nvidia right now, and one of the stocks on this list is another multitrillion-dollar tech giant. However, the second stock on this list shows that investors can potentially get higher long-term returns if they look at high-growth companies with lower market caps. That's exactly what Nvidia was a decade ago.
Alphabet is turning into the AI leader
Image source: Getty Images.
Alphabet (GOOG +1.18%) (GOOGL +1.28%) looked like it was in danger during the initial stages of the AI race. ChatGPT looked like an existential threat, and Google's AI made mistakes in the beginning. However, Alphabet has made impressive strides with its AI to the point where Gemini 3 Pro got first place in the Artificial Analysis Intelligence Index.
NASDAQ: GOOGL
Key Data Points
The company's innovations have vanquished concerns about AI models gobbling up search engine market share from Google. However, that's just the beginning of Alphabet's AI pursuits. Its new AI chips directly compete with Nvidia's, and Meta Platforms plans to spend billions of dollars on Alphabet's chips.
Alphabet's AI chips provide two benefits. The first advantage is that the company has a new revenue stream that can grow quickly. Investors only have to look at Nvidia's financial results to see how much revenue growth Alphabet can generate from good AI chips.
The second perk of these AI chips is that they introduce more competition. Nvidia may have to lower its prices in the future to compete with Alphabet's AI chips. Lower chip prices allow Alphabet to expand its AI presence while keeping costs more manageable.
It also has Waymo, which provides autonomous vehicles and can become a significant revenue source in the future. Waymo is being tested in some U.S. cities and on highways as mainstream adoption gets closer.
However, the big difference with Alphabet versus other AI stocks is that it has multiple viable businesses already. Online ads and Google Cloud are still growing, making it easier for the company to invest billions of dollars into AI projects.
AppLovin continues to deliver excellent ad growth
AppLovin (APP +7.26%) has gained almost 1,000% over the past five years thanks to its high-demand adtech platform. Its AI-powered tools display online ads in mobile apps and other ad channels.
NASDAQ: APP
Key Data Points
While gaming app ad placements are the company's foundation, its ad network has expanded to non-gaming mobile apps, connected TV, streaming videos, and the web. AppLovin recently rebranded its ad platform as Axon to prioritize non-gaming advertisers. Axon is still invite-only, with a global launch likely in 2026. That launch will make AppLovin more accessible to small and medium-sized businesses.
AppLovin doesn't just provide ad channels to show online campaigns to more people. It uses AI to automate ad management and optimize placements based on predictive analysis and real-time feedback, resulting in higher return on investments (ROIs).
Hypergrowth stocks require strong financial growth rates, and AppLovin certainly delivers on that front. Third-quarter revenue increased by 68% year over year, while net income surged by 92% year over year. It's hard to find companies with AppLovin's high revenue growth that also have net profit margins hovering near 60%. Those types of stocks tend to be long-term winners.
AppLovin also has an excellent balance sheet that suggests the growth is sustainable. It has $3.48 billion in current assets compared to $1.07 billion in current liabilities. AppLovin has no problem keeping up with its expenses while continuing to deliver high growth rates for investors. Some of that capital has gone toward stock buybacks, and management has $3.3 billion authorized for repurchasing shares.
