Why Alphabet May Outshine Nvidia as Investment Strategies Shift
Nvidia (NASDAQ: NVDA) continues to dominate the stock market with its impressive $3.24 trillion market cap as of January 13. The tech giant has been a hot trading item, with an approximate $28 billion in daily dollar volume recently—outpacing other giants like Apple, Microsoft, and Amazon.
A recent research report by The Motley Fool highlights that Nvidia is a staple in many hedge funds managed by prominent billionaires. Out of 16 analyzed funds, 10 included Nvidia among their top 10 holdings.
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However, the report shows that Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) was even more prominent, appearing as a top-10 holding in 11 hedge funds—alongside Meta Platforms, the parent company of Facebook and Instagram.
Despite Alphabet’s daily trading volume of $9.2 billion being less than Nvidia’s, it is important to note that Alphabet saw a 35% increase in stock value over the past year, compared to Nvidia’s remarkable 145% return.
Why Consider Alphabet?
Alphabet possesses several attractive features worth mentioning. Here are the key points that highlight its strengths:
- For digital advertising, Google’s extensive market share is unmatched, bringing in total revenues of $258 billion and operating profits of $115 billion over the last year. In comparison, Nvidia’s revenues stood at $113 billion.
- Alphabet is versatile. Its management rebranded the company from Google to Alphabet to gain investor confidence in a broader array of offerings. Currently, 13% of its sales come from Google Cloud services, while another 11% stems from the YouTube platform, alongside ventures into fields like medical research and self-driving technology.
- Alphabet has long been at the forefront of artificial intelligence. Its DeepMind unit began its work in 2010, impressively developing AI systems like the AlphaZero chess engine, which mastered chess within 24 hours by competing against itself.
- Despite being valued at $2.3 trillion, Alphabet remains appealingly priced, with its A shares trading at 25.3 times earnings and 6.9 times sales, compared to Nvidia’s ratios of 52.5 and 28.8.
Why Alphabet Might be the Smarter Choice
While Nvidia is expected to generate shareholder value in the long run, the quick returns seen during its AI-driven boom may be fading. The question remains: how sustainable is this growth? Nvidia concentrates predominantly on AI, which can be a risky strategy.
Conversely, Alphabet has evolved from a single-focus entity into a diversified powerhouse. This broad scope captures various promising business opportunities, which bodes well for long-term investment. Additionally, its relatively low stock prices make it a more attractive option compared to Nvidia’s high valuation.
In summary, Alphabet currently presents a better investment opportunity than Nvidia. While Nvidia remains a strong player, consider decreasing your position on its shares and exploring the undervalued potential in Alphabet.
Explore New Investment Opportunities
Do you feel like you’ve missed the chance to invest in top-performing stocks? Now is the time to act.
Occasionally, our analysts highlight “Double Down” stock recommendations for companies poised for growth. If you think you’ve missed your shot, this could be the right moment to invest again. The numbers support the decision:
- Nvidia: If you invested $1,000 when we doubled down in 2009, you’d have $353,272!*
- Apple: If you invested $1,000 when we doubled down in 2008, you’d have $45,049!*
- Netflix: If you invested $1,000 when we doubled down in 2004, you’d have $457,459!*
We are currently issuing “Double Down” alerts for three outstanding companies, and this opportunity may not come around again soon.
See 3 “Double Down” stocks »
*Stock Advisor returns as of January 13, 2025
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet, Amazon, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
