Is 2026 the year Nvidia finally underperforms versus the broad market? I think it might be.
The leader in artificial intelligence (AI) computer chips is unlikely to give up all its gains from the last few years, but it is facing increasing competition, a high starting valuation, and the potential of near-term overspending to build out AI infrastructure. That makes the stock risky for 2026.
That doesn't mean you should dump your entire position. However, if you are thinking of buying AI stocks in 2026, there are two companies I believe will finish the year with larger market caps than Nvidia: Amazon (AMZN 1.52%) and Alphabet (GOOG 1.68%). Here's why both are better buys than Nvidia today.
NASDAQ: AMZN
Key Data Points
Alphabet's AI comeback
Alphabet is the conglomerate that owns Google, YouTube, Android, Waymo, and other technology properties. It is one of the largest and most profitable companies in the world, with billions of users across multiple product lines.
Image source: Getty Images.
The stock was deemed a potential AI loser after ChatGPT came out and rapidly began taking market share of search and AI queries, with Alphabet falling flat-footed after the launch. Now, with the launch of updated Gemini AI models for text, images, and video creation (among other things), Alphabet is steadily gaining market share back from OpenAI and ChatGPT.
Its stock has begun to perform because of it. Alphabet stock is up 60% year to date (YTD), which is more than double the returns of Nvidia. It is growing revenue at 15% year over year in constant currency, and with expanding profit margins. The durability of Google Search and YouTube, fast growth at Google Cloud, and long-term plays with Gemini and Waymo's self-driving cars should help Alphabet keep compounding its earnings power for years to come.
Amazon's dual engines
Alphabet's growth path in 2026 is clear. Amazon's will be determined by management's ability to wrangle costs that spiraled out of control during the pandemic years, which is a headwind still impacting the business.
Amazon's cloud computing division -- Amazon Web Services (AWS) -- grew revenue 20% year over year last quarter, with a fat 36% operating margin over the last 12 months. Cloud computing is benefiting from the AI infrastructure expansion, with Amazon specifically helped by the likes of its partner Anthropic, a start-up growing incredibly quickly that Amazon is also an investor in. OpenAI is in talks with Amazon about a $10 billion investment that would likely flow back through to AWS cloud computing spending.
You have a 36% operating margin at AWS. In retail, Amazon is still growing strongly, with double-digit growth in the last few years in North America and internationally. Advertising, third-party seller services, and subscription revenue now generate $279 billion in trailing revenue, or 40% of Amazon's total revenue. These segments have high profit margins and have been growing faster than the overall Amazon retail business.
And yet Amazon's retail operations in North America only have a 6.6% operating margin. This could be looked at as a failure or a future path to profit expansion. Amazon has been trimming its ranks through layoffs, which should help margins expand throughout 2026 and beyond. If retail can keep up this operating leverage, along with the fast growth at AWS, then Amazon's profitability will explode in 2026.
NVDA EBIT (TTM) data by YCharts
The math: Why Amazon and Alphabet will be worth more than Nvidia
Today, Alphabet generates $128 billion in operating income, Nvidia $110 billion, and Amazon $80 billion. Nvidia's revenue is currently growing much faster than both of these businesses, but that could come to a grinding halt if the AI infrastructure buildout slows down in 2026.
Nvidia's revenue growth doesn't have to go negative in order for earnings to fall, as it is currently implementing huge price increases for its products that are generating incredibly high profit margins. Plus, its stock trades at a more expensive earnings ratio than both Alphabet and Amazon.
If Nvidia's revenue growth slows down in 2026 while Alphabet and Amazon keep chugging along, then Nvidia's earnings will likely fall along with its high price-to-earnings (P/E) ratio. That could lead both stocks to finish 2026 with market caps larger than Nvidia.
