Determining an ultimate winner of the artificial intelligence (AI) arms race isn't really possible right now. We're right in the middle of it, and there's no telling what the long-term effects will be. However, I think there is one company that could eventually be declared the winner in the AI arms race.
While some may point to companies like Nvidia (NVDA +1.88%) or Micron Technology (MU -2.27%), I think there are some long-term issues with these two that prevent them from being named the ultimate winner. Instead, I think Alphabet (GOOG -0.53%) (GOOGL -0.58%) will take the crown.
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Why not Nvidia or Micron?
The real question is, what will define the ultimate winner? If it's purely based on stock performance from low to high, then Nvidia and Micron may have an argument. But if it's long-term, sustained performance, it becomes a bit difficult to defend these two.
Nvidia, the company that has been the definitive AI build-out stock, makes GPUs and various products to support its computing ecosystem. Right now, these units are in extreme demand, and Nvidia cannot build fast enough to meet the needs of AI hyperscalers. Eventually, there won't be as high a demand for its computing resources, and this could squeeze Nvidia's prices and margins. While new data centers will pop up from time to time, they won't match the current pace of data center build-outs.
NASDAQ: NVDA
Key Data Points
Micron is in even more of a squeeze. It produces memory chips, which are in tight supply. This has caused memory chip prices to skyrocket, boosting Micron's profits and earnings. Micron and its peers are building new production capacity to solve this shortage, but that could also have a negative effect on pricing as supply becomes more abundant. This could be a problem for Micron over the next few years, which is why it may not be the ultimate winner of the AI arms race.
Alphabet has a rock-solid approach to AI
Instead, I'd propose that Alphabet is in a great spot. Alphabet has placed several bets in the AI sector, and sometimes they compete against each other. On one hand, Alphabet is developing its own large language models and integrating them into its family of products. This has the potential to blossom into a major business component someday, but it's still likely to lose money right now.
On the other hand, Alphabet is a major cloud computing host, and Google Cloud is making a ton of money from clients that need access to AI computing capacity. One of those clients is Anthropic, the very company it's competing against for large language model supremacy. Regardless of how Alphabet's internal models perform, there will always be a need for AI computing power to run workloads. This will create a long-term recurring revenue model for Alphabet, as clients must pay for their computing usage.
NASDAQ: GOOGL
Key Data Points
Google Cloud is already growing at breakneck speed, with revenue rising at an 82% pace. That's far faster than other cloud computing providers, and showcases that Google Cloud is a rising star in this area. Alphabet is also making a ton of money from cloud computing, as it posted a 36% operating margin in the division.
Alphabet is having to spend big to make this happen, as it bumped its 2026 capital expenditure guidance to a range of $195 billion to $205 billion. However, with Google Cloud growing at an 82% clip, these investments appear to be paying off.
I think Alphabet will be one of the major long-term winners in the AI arms race. There is still a ton of growth ahead for this industry, and I think buying Alphabet today makes a lot of sense for investors.
