There is nothing wrong with Nvidia (NVDA +2.06%) as a business. On the contrary, it's seeing explosive growth.
Its fourth quarter of fiscal 2026 was remarkable, with revenue rising 73% year over year to $68.1 billion and data center revenue climbing 75% to $62.3 billion. Additionally, management guided for first-quarter fiscal 2027 revenue of about $78 billion -- a huge sequential uptick.
Results like these reflect extraordinary execution by any standard.
But there are several factors that keep me on the sidelines with Nvidia, including the cyclicality of the chip industry, its limited business diversification, and its premium valuation.
So, how can you invest in artificial intelligence (AI) while also mitigating these risks? I think a good way is with Alphabet (GOOG +3.56%)(GOOGL +3.71%).
For Alphabet, AI is already showing up in Search usage, Cloud growth, subscriptions, and monetization. And unlike Nvidia, Alphabet isn't relying on one main AI profit stream to make the valuation work.
Imag source: Getty Images.
Search remains a powerhouse
Alphabet's fourth-quarter 2025 revenue rose 18% year over year to $113.8 billion, fueled by a number of businesses. The company's Google search and other revenue increased 17% to $63.1 billion, and Google subscriptions, platforms, and devices revenue rose 17% to $13.6 billion.
But what's interesting is just how strong search is proving to be in an AI era. In fact, it's looking like AI could prove to be a major tailwind for search.
During the company's fourth-quarter earnings call, Alphabet CEO Sundar Pichai said Google search saw the highest usage in Q4 ever. Daily AI Mode queries per user in the U.S. doubled since launch, he explained -- and those queries are now three times longer than traditional searches.
Later in the call, Pichai said Alphabet hadn't seen "any evidence of cannibalization" from the Gemini app. Instead, Alphabet says AI is creating "an expansionary moment" for search.
Surging cloud revenue
Then there's Alphabet's cloud computing business, Google Cloud. Cloud revenue accelerated from 34% year-over-year growth in the third quarter of 2025 to 48% in the fourth quarter, reaching $17.7 billion. And, even more impressive, cloud operating income increased from $3.6 billion in Q3 to $5.3 billion in Q4 -- and cloud backlog surged from $155 billion at the end of Q3 to $240 billion at the end of Q4.
It would be difficult to overstate the momentum of this business. Consider that the number of Cloud deals above $1 billion in 2025 surpassed the total for the previous three years combined. In addition, existing customers are outpacing their initial commitments by more than 30%, Pichai explained during the call.
NASDAQ: GOOGL
Key Data Points
A compelling valuation
As of this writing, Alphabet trades at about 29 times earnings, versus about 37 for Nvidia.
But a key risk is the cost of Alphabet's AI transition. Management expects 2026 capital expenditures of $175 billion to $185 billion, versus $91.4 billion in 2025.
Depreciation already rose to $21.1 billion in 2025 from $15.3 billion in 2024 -- and management expects depreciation growth to accelerate in 2026.
Still, if I were buying one AI stock today instead of Nvidia, I think Alphabet is the better choice. Nvidia may be the center of the AI revolution as an AI chipmaker, but Alphabet gives investors exposure to AI through search, cloud, subscriptions, and custom silicon -- and it does so at a lower valuation.
Of course, I'd still keep any position in Alphabet modest, given the risks as the company ramps up its capital expenditures. But I think the tech stock's valuation, overall, does a good job of pricing in these risks. The stock isn't cheap -- but it's not expensive either. That's a good setup for a company with accelerating momentum, driven by AI's impact on several of its core businesses.
