Better AI Stock: Alphabet vs. Nvidia

Core Viewpoint - The article compares Nvidia and Alphabet as leading stocks in the AI sector, discussing their growth, valuations, and investment potential amidst the generative AI boom [2][4]. Group 1: Nvidia's Performance and Valuation - Nvidia has experienced a remarkable stock increase of 701% during the generative AI boom, significantly outperforming Alphabet's 72% growth [3]. - The stock is currently valued at 25 times sales and 54 times free cash flows, leading some investors to view it as overpriced [5]. - Despite high valuations, Nvidia's sales doubled in 2023 and are expected to double again in 2024, indicating strong demand for its AI accelerator chips [7]. - Nvidia's stock is favored by growth-oriented investors, with a majority of analysts rating it as a "buy" and an average one-year price target 24% above its current value [6]. Group 2: Alphabet's Financial Strength and Valuation - Alphabet generates annual revenues approximately three times larger than Nvidia's, despite slower growth rates [9]. - The stock trades at 5.9 times sales and 28 times free cash flows, making it more reasonably priced compared to Nvidia and in line with S&P 500 averages [11]. - Alphabet is positioned as a value-oriented investment in the generative AI boom, with a strong long-term outlook regardless of AI developments [12]. Group 3: Investment Recommendations - While Nvidia may maintain its dominance in AI hardware, its high valuation raises concerns for some investors [14]. - Alphabet is presented as a more attractive investment option due to its longevity and reasonable share price, making it a strong buy at current valuations [15].