Alphabet’s Announcement Sends Nvidia Stock Investors Reeling
Alphabet, the parent company of Google, has made significant strides in the AI chip market with its recent launch. On November 18, 2023, Alphabet unveiled its Gemini 3 AI model, which has quickly established itself as a formidable competitor to Nvidia’s renowned graphics processing units (GPUs).
Key Developments and Competitive Landscape
Until now, major cloud providers like Alphabet, Amazon, and Microsoft have invested heavily in developing their own chips for AI, but none matched Nvidia’s technology. The launch of Gemini 3, which utilizes Alphabet’s tensor processing units (TPUs), could change that dynamic and challenge Nvidia’s longstanding dominance in AI hardware.
Financial Growth and Market Demand
Alphabet’s Google Cloud has experienced substantial growth, generating $15.1 billion in revenue during the third quarter of 2025, a 33.5% year-over-year increase. This growth was driven by soaring demand for TPUs, leading to an 82% surge in order backlogs, reaching $155 billion. Amin Vahdat, general manager at Google Cloud, suggested that this demand-supply imbalance might persist for the next five years.
- Revenue for Google Cloud: $15.1 billion in Q3 2025
- Year-over-year growth: 33.5%
- Backlog increase: 82%, totaling $155 billion
Shifting Demand in AI Development
As companies like Meta Platforms transition from Nvidia GPUs to Alphabet’s TPUs, the implications for Nvidia could be significant. Meta is reportedly negotiating to procure TPUs worth billions starting in 2027 for its Llama AI models, illustrating the growing interest in Alphabet’s hardware.
Moreover, Anthropic has signaled plans to leverage up to 1 million TPUs for its flagship Claude AI models, which further emphasizes the demand for these chips. The rise of TPUs in cloud offerings may inherently decrease reliance on Nvidia’s GPUs, posing a challenge to Nvidia’s market position.
Nvidia’s Position and Future Potential
Despite these emerging challenges, Nvidia still holds a strong position in the AI market. The company’s GPUs remain the preferred choice for many developers, owing to their flexibility and the integration of its proprietary CUDA software, essential for numerous AI applications.
Nvidia’s recent forecasts indicate that AI data center expenditure could reach $4 trillion annually by 2030. With a projected revenue of $213 billion for the current fiscal year, there remains significant growth potential, even amidst intensifying competition.
Investment Perspectives
Currently, Nvidia’s stock presents an attractive buying opportunity with a price-to-earnings (P/E) ratio of 44.6, a notable discount compared to its historical average. Similarly, Alphabet’s stock, despite a 70% return this year, holds a P/E ratio of 31.2, making it slightly undervalued compared to the Nasdaq-100 index.
In summary, as Alphabet’s TPU capabilities expand, the competition between Alphabet and Nvidia in the AI hardware market is set to intensify, presenting both challenges and opportunities for investors in the coming years.
