Alphabet AI chips, Gemini model position it to rival Nvidia

Core Viewpoint - Investors are reassessing the technology landscape as Alphabet's new Gemini AI model and demand for AI chips drive its stock higher, potentially reshaping market leadership [1][6]. Company Performance - Alphabet's shares increased by 2%, reaching a market value of $3.9 trillion, with a 37% rally since mid-October adding approximately $1 trillion in value [1][6]. - The company's market cap is now about $300 billion away from Nvidia's $4.2 trillion [6]. Competitive Landscape - Meta Platforms is in discussions to utilize Google's tensor processing units (TPUs) in data centers by 2027, which could position TPUs as a viable alternative to Nvidia's chips [1][2][4]. - The narrative surrounding Nvidia's dominance in the AI chip market is shifting, with expectations of increased competition [2][4]. Stock Valuation - Nvidia's stock fell by 5.1%, while Advanced Micro Devices (AMD) shares dropped by 7.8% [3][6]. - Nvidia is currently trading at 26 times forward earnings, below its decade average of 35 times, while Alphabet trades at 27 times forward earnings, up from an average of 20 times [3][7]. Market Sentiment - Alphabet's stock is showing signs of being overbought, with a 14-day relative strength index around 75, indicating potential for a pullback [5][7]. - Analysts suggest that Alphabet could take a leadership role in the AI industry, but caution that the stock may be overbought [5][7].