Nvidia has been one of the best-performing stocks in the current bull market. The stock has increased by more than 1,000% since the release of ChatGPT, which kicked off the artificial intelligence (AI) spending spree among big tech stocks. Nvidia has been a huge beneficiary of the growing spend on artificial intelligence infrastructure, as its GPUs are best in class for training large language models.
Despite its status as the largest company in the world with a market cap of around $4.5 trillion, analysts think Nvidia could keep climbing higher in 2026. The median price target on the stock is $250, about 30% higher than the stock price as of this writing. That would make it a $6 trillion company.
But another AI leader looks poised to outperform the chipmaker in 2026 thanks to its momentum across hardware, software, and real-world applications of AI. Here's why I expect Alphabet (GOOG +0.24%) (GOOGL +0.58%) to outperform Nvidia next year.
Image source: Getty Images.
Challenging the AI leaders
Alphabet has made tremendous progress in artificial intelligence in 2025, and that should show up in continued financial strength in 2026.
Its Google Cloud division saw revenue growth accelerate to 34% last quarter while its operating margin continued to expand, reaching 24%. Those trends should continue in 2026, as management reported a backlog of $155 billion at the end of the third quarter, up 46% year over year.
Alphabet is seeing notably strong demand for its custom-built Tensor Processing Units (TPUs). The AI accelerator chips are a more cost-efficient alternative to Nvidia GPUs for AI training and inference. Anthropic plans to use TPUs for some of its workload starting in 2026, and Alphabet is reportedly in discussions with Meta Platforms to use the chips and port popular AI framework PyTorch to the hardware. The relative performance of TPUs to Nvidia's GPUs and other custom AI accelerators should continue to fuel growth for Google Cloud in 2026 with significant margin improvements.
Meanwhile, Alphabet also saw strong relative performance for its large language models. Gemini 3.0, released in November, scored highly on most benchmark tests, outperforming top models from both Anthropic and OpenAI at the time. The release spurred OpenAI CEO Sam Altman to declare "code red," as the model performed better than GPT 5.1 and pushed more consumers to download Google's Gemini app, which had 650 million monthly active users as of November.
Alphabet could have a big customer for its LLM next year as well, as Apple is reportedly going to use Gemini for some of its new AI-powered Siri features starting next spring. The iPhone maker will pay $1 billion per year to license the model. Apple will run the model on its own servers, so it would be practically all profit for Alphabet.
NASDAQ: GOOG
Key Data Points
Alphabet benefits from using its own AI innovations
Alphabet isn't just out-innovating the biggest competitors in the field; it's also able to use those innovations in its own business.
As a large language model developer, it's able to take advantage of its massive cloud computing business and TPU development. But Alphabet's also using that large language model to improve its core search engine, which remains a cash cow for the business. It's also continuing to refine various machine learning algorithms, improving its advertisement placement and YouTube engagement.
In search, features such as AI Overviews and AI Mode have increased the types and number of search queries users make. And with Google monetizing those searches at roughly the same rate as those without AI-powered results, it's been a net positive for revenue. Over the last two years, the company has drastically cut the cost of generating AI Overviews, improving profitability. Overall, Google Search revenue accelerated through the first three quarters of 2025, up 15% in the third quarter.
YouTube, likewise, saw revenue growth accelerate, climbing 15% in the most recent quarter. AI features, such as tools that help edit videos and create thumbnails, as well as identify shoppable products in videos, have helped improve engagement and monetization.
Alphabet's also seeing progress with Waymo, its self-driving car business, which is part of its Other Bets segment. The robotaxi service completed 14 million trips in 2025, more than triple the number of trips completed in the previous year. Management says it's on track to complete 1 million rides per week by the end of 2026 as it expands to 20 new cities. The business could be a key source of revenue growth as it scales next year.
The value is there
With growth across hardware, software, and its core businesses, Alphabet presents a diversified growth stock that trades at a good value. Investors can currently pick up shares for less than 30 times forward earnings expectations. By comparison, you'll pay over 40 times earnings for Nvidia shares.
Alphabet should experience strong earnings growth as the cloud computing business scales and operating margin expands. It already generates tens of billions in cash every year, providing room to increase its share repurchase program, further boosting earnings per share. As a result, paying less than 30 times earnings could prove a bargain.
Meanwhile, Nvidia may struggle to build on its gains in 2026, especially as Google's TPUs, competing GPUs, and other companies' custom AI accelerators make progress in eating into its market share. At its current price, it'll have to outperform already high expectations to produce returns like the last few years. It seems more likely that Alphabet will be the better-performing stock in the coming year.
