Nvidia’s market value once exceeded US$5 trillion, but then fell back due to competitive pressure.
The artificial intelligence (AI) giant’s entire product line demonstrated strong financial and operating results.
The stock trades at a slight premium but could still move higher.
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NVIDIA The company became the first global company to reach a market capitalization of $5 trillion at the end of October, thanks to continued momentum and optimism in artificial intelligence (AI) spending. Granted, it was an impressive milestone, but the stock has since retreated 10% and is trading steadily in the $4 trillion range.
A handful of stocks are also worth $5 trillion heading into 2026, and Nvidia investors expect to return to that level again. But one of my favorite stocks will be the first to hit $5 trillion next year.
Image source: Getty Images.
Nvidia delivered excellent earnings growth for investors amid soaring demand for GPUs. But ultimately, Nvidia is a one-trick pony. If its customers slow spending or spread spending to other chipmakers, there are no other revenue streams to make up for those losses. It’s this concern that has sent shares down 10% since hitting an all-time high in early November.
letter(Nasdaq: Google)(Nasdaq: Google) has become a major threat to Nvidia’s dominance. Alphabet and Anthropic announced a deal to let the large language model developer use its tensor processing units (TPUs) on Google Cloud starting in 2026. Not only will this generate significant revenue for Alphabet’s cloud computing business, but it also poses a serious threat to Nvidia, as a leading artificial intelligence developer chooses to use Alphabet’s custom chips instead of leading GPUs.
Recently, a information explain meta platform Also interested in using TPU for its Llama model. Meta can rent space on the Google platform or purchase TPU directly. A Google Cloud executive reportedly said that TPU alone could bring 10% of Nvidia’s revenue to Alphabet.
Analysts on average expect Nvidia’s revenue next year to be $316 billion, which means Google Cloud will receive $31 billion in revenue from TPUs. For reference, that’s about half of Google Cloud’s current operating rate.
But selling TPUs is only a small part of Alphabet’s overall artificial intelligence business. The company provides a full range of artificial intelligence services from consumer products to cloud computing infrastructure. Each piece of the puzzle supports the other, ensuring the company has a bright future and protecting it from competitive threats.
Many believe that the rise of artificial intelligence chatbots such as ChatGPT and Claude poses a huge threat to Alphabet’s Google search business. In fact, the company’s search revenue growth is expected to slow in 2024, but that’s not entirely out of the ordinary for the company. Importantly, this trend quickly reversed in 2025 as revenue re-accelerated, rising 15% in the most recent quarter.
A big reason for this reversal is the growth of AI Overviews and Alphabet’s increased monetization of the feature. AI Overview provides an AI-generated summary of top search results for various queries. Management says the new features increase overall engagement, and search results with AI overviews are now monetized at the same rate as search results without AI overviews. As a result, they are proven to increase overall search revenue.
Alphabet is building on this momentum with its AI model, using Gemini AI to push users into a chatbot interface. If Alphabet integrates them into chatbots, this could lead to more subscription revenue or more potential advertising.
This brings us to the second layer of Alphabet’s artificial intelligence stack. Gemini is more than just a fun chatbot for internet searchers. The base Gemini model is used by millions of developers, as are Alphabet’s other models (Veo, Genie, and Nano Banana). Management counts more than 13 million developers using its models in their applications.
The most recent version, Gemini 3.0, impressed many reviewers. In fact, according to a report from OpenAI, OpenAI believes the new model poses a serious threat to its latest version of GPT. wall street journalciting an internal memo from CEO Sam Altman.
The third layer of the AI stack is Alphabet’s TPU, which it uses to train models. As discussed, it rents out TPU servers through Google Cloud, which is the fourth layer in the stack.
Google Cloud is growing rapidly, with revenue up 34% in the most recent quarter. Its backlog is up an impressive 82%, indicating continued growth has a long way to go. Additionally, Alphabet’s operating margins are expanding as the business scales, which should mean stronger earnings growth going forward.
Despite AI’s various growth drivers and diversified revenue streams, Alphabet stock remains attractive, trading at a forward price-to-earnings (P/E) ratio of about 29. That’s a premium to the market, but the company arguably deserves it, as its diversified revenue and full-stack operations make it less risky than other AI stocks. Despite heavy investments in artificial intelligence computing, the company continues to generate tens of billions of dollars in free cash flow every quarter. So it’s no surprise that Alphabet’s market capitalization climbed to $5 trillion relatively quickly by 2026.
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Adam Levy works on Alphabet and Meta platforms. The Motley Fool has positions on and recommendations for Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
Prediction: This will be the first AI stock to reach a $5 trillion valuation by 2026 Originally published by The Motley Fool
