Better AI Stock: Alphabet vs. Nvidia
Nvidia trades at much higher valuation multiples than Alphabet, making it an expensive bet on future AI growth.
Alphabet's stable business and lower valuation make it appealing for value-focused investors.
Alphabet looks like a better buy today, but Nvidia still has upside potential for a certain type of high-growth investors.
10 stocks we like better than Alphabet ›
Artificial intelligence (AI) has been a hot topic for more than two years now. A small group of tech giants has emerged as leaders in this space, providing either the computing hardware or the user-friendly services that power this technology revolution. You know them as the "Magnificent Seven" stocks. This phrase suggests greatness, though it was always meant as a warning signal. Several of the seven heroes died in the 1960 movie by the same name. The seven original AI leaders could stumble and fall, too.
As I'm writing this on May 28, the Magnificent Seven stocks have separated into two distinct groups. High-performance microchip designer Nvidia (NASDAQ: NVDA) stole the show so far with a total gain of 701% in the ChatGPT-inspired generative AI boom. Software and services giant Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has a more modest stock return of 72% over the same period.
There are so many questions in the air. Can Nvidia hold on to its dominant grip on the AI hardware opportunity? Will Alphabet's Google division thrive in the new age of AI-driven online services? Are the stocks trading at reasonable valuations these days? And most of all -- which one of these mighty AI stocks is the better buy today?
Let's take a look.
At first glance, Nvidia's stock looks too hot to handle. The stock price has multiplied by 8 in about 30 months. Nvidia's business may be booming, but those shares are changing hands at the lofty valuation of 25 times sales and 54 times free cash flows. Many investors will look no further, walking away from these deal-breaking valuation multiples.
At the same time, lots of investors absolutely love Nvidia's stock at these prices. It comes with one of the lowest short-seller interests on the market. An overwhelming majority of analysts tracking this stock call it a "buy" and the average one-year price target is about 24% above the current value.
And the Nvidia bulls have their reasons. The company's sales more than doubled in 2023, doubled again in 2024, and are poised to continue soaring as the generative AI market evolves. Furthermore, Nvidia can charge very high prices for its AI accelerator chips and be more limited by manufacturing capacity than by customer demand. As such, Nvidia's profits have skyrocketed much faster than the plain top-line sales.
So if you expect Nvidia to stay on its AI hardware throne throughout the mega-growth portion of this generative AI revolution, the stock could definitely be a good buy today. It's not every investor's favorite cup of wealth-building tea, but Nvidia's stock appeals to a certain type of growth-oriented stock buyer.
Here's a fun fact. Alphabet makes more money than Nvidia, even after the chip guru's massive growth spurt.
The Google parent's annual revenues are about three times the size of Nvidia's. The difference grows smaller when you look at different types of profit, but Alphabet is still consistently larger:
Now, Alphabet's huge financial figures are paired with significantly slower growth rates. Hence, the stock doesn't come with growth-inspired price premiums. Trading at 5.9 times sales and 28 times free cash flows, Alphabet's ratios are in the same ballpark as the average S&P 500 (SNPINDEX: ^GSPC) component.
That makes Alphabet a value-oriented bet on the generative AI boom. It's also a solid long-term holding, with or without the AI-focused opportunity. This company was built to thrive in pretty much any economy. The Google-based Alphabet you see today could look very different 10 or 20 years from now, but it should still be an innovative winner.
I don't want to throw Nvidia under Wall Street's heaviest bus. The company just might be able to stave off AI chip rivals for years to come, until the ballooning valuation finally makes sense. I'm certainly not closing out my own Nvidia position today, hoping to catch a bit more of its AI-driven gains.
But I'm not buying more Nvidia stock today, either. Alphabet is a much more tempting idea, pairing the company's ultimate longevity with a very reasonable share price. It's one of my favorite investments of all time, and a particularly strong buy at today's modest valuation.
Before you buy stock in Alphabet, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Alphabet wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $638,985!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $853,108!*
Now, it's worth noting Stock Advisor's total average return is 978% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join .
See the 10 stocks »
*Stock Advisor returns as of May 19, 2025
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet and Nvidia. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.
Better AI Stock: Alphabet vs. Nvidia was originally published by The Motley Fool
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
an hour ago
- Yahoo
Stocks to Watch as May's Jobs Report Beats Economists' Expectations: PCTY, MMS
The broader indexes saw a nice uptick on Friday as May's Jobs report came in better than expected, with the S&P 500 and Nasdaq rising over +1%. Driving the stock market's uptick, U.S. employers added 139,000 jobs, which came in above most economists' expectations of 125,000-130,000, while the unemployment rate remained steady at 4.2%. Also helping to appease tariff uncertainty was that wage growth outpaced inflation, with average hourly earnings rising 3.9% year over year compared to April's latest reading of a 2.3% inflationary uptick (Consumer Price Index). Notably, the next inflation report is set for Wednesday, June 11, when the Fed releases the latest CPI data. That said, here are a few stocks investors will want to consider following May's optimistic jobs report, with payroll stocks being of interest in particular. Image Source: Federal Reserve Economic Data Paylocity PCTY is a cloud-based payroll and human capital management (HCM) software solutions provider to keep an eye on. Notably, Paylocity has continued an impressive streak of surpassing earnings expectations, most recently beating EPS estimates for its fiscal third quarter by 16% in May. Paylocity has now exceeded the Zacks EPS Consensus for 26 consecutive quarters with an average EPS surprise of 15.4% over the last four quarters. Image Source: Zacks Investment Research Meanwhile, government health and human services program provider Maximus MMS is benefiting from a pleasant trend of rising EPS revisions and trades at a very reasonable 10.8X forward earnings multiple. Glamorizing Maximus' attractive P/E valuation, fiscal 2025 and FY26 EPS estimates have risen nearly 7% and 4% in the last 30 days, respectively, with the company blasting earnings expectations for its fiscal second quarter by 47% last month (Q2 EPS of $2.01 versus $1.37 Consensus). Image Source: Zacks Investment Research Other payroll stocks to consider include HCM software providers Dayforce DAY and Paychex PAYX, along with outsourcing company Barrett Business Services BBSI which all land a Zacks Rank #3 (Hold). Furthermore, certain medical and hospitality-related stocks are appealing as May's Jobs report showed job growth was strongest in the healthcare and leisure/hospitality sectors, which added 62,000 and 48,000 jobs, respectively. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Maximus, Inc. (MMS) : Free Stock Analysis Report Paylocity Holding Corporation (PCTY) : Free Stock Analysis Report Paychex, Inc. (PAYX) : Free Stock Analysis Report Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report Dayforce, Inc. (DAY) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
an hour ago
- Yahoo
Five Below: Strong Q1 Comparable Sales
Five Below beat analyst expectations across the board, reporting strong comparable sales growth of 7.1%. The second quarter outlook is solid, although comparable sales growth will slow as the year goes on. Tariffs and economic uncertainty aren't yet having a negative impact on customer purchasing trends or the bottom line. 10 stocks we like better than Five Below › Here's our initial take on Five Below's (NASDAQ: FIVE) fiscal 2025 first-quarter financial report. Metric Q1 FY24 Q1 FY25 Change vs. Expectations Revenue $811.9 million $970.5 million +19.5% Beat Earnings per share (adjusted) $0.60 $0.86 +43% Beat Comparable sales growth (2.3%) 7.1% +9.4 pp n/a New store openings 61 55 -10% n/a Five Below reported solid first-quarter results despite a complex macroeconomic backdrop. Comparable sales rose by 7.1%, driven largely by an increase in transactions, while total revenue jumped 19.5%. The company opened 55 new stores during the quarter, and those stores are performing well, according to Five Below CEO Winnie Park. The retailer is navigating tariffs and global economic uncertainty, and so far, those potential headwinds haven't had much of an impact on Five Below's business. Operating income and adjusted earnings per share rose significantly from the first quarter of fiscal 2025, with the latter beating analyst expectations. For the fiscal second quarter, Five Below expects to open around 30 net new stores and produce comparable sales growth between 7% and 9%. Total revenue should come in between $975 million and $995 million, while adjusted EPS is expected between $0.50 and $0.62. For the full fiscal year, the company sees comparable sales growth between 3% and 5%, 150 net new stores, revenue between $4.33 billion and $4.42 billion, and adjusted EPS between $4.25 and $4.72. Share prices of Five Below were up about 2% in after-hours trading on Wednesday soon after the release of the first-quarter report. The company beat analyst estimates for revenue and adjusted EPS, and its second-quarter outlook looked solid. However, the full-year outlook called for slower comparable sales growth, which could be keeping the stock price in check. While tariffs and economic uncertainty aren't having much of an impact on Five Below right now, the situation is fluid. The company sourced about 60% of its purchases from domestic vendors in 2024, although it's difficult to know how exposed those vendors are to tariffs. The timing and makeup of trade deals the U.S. strikes with other countries will have an impact on Five Below's costs, and consumer behavior remains a wildcard. Investors should listen to Five Below's earnings call on Wednesday evening for more information from management on how tariffs are affecting the full-year outlook. Full earnings report Investor relations page Before you buy stock in Five Below, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Five Below wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $668,538!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $869,841!* Now, it's worth noting Stock Advisor's total average return is 789% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy. Five Below: Strong Q1 Comparable Sales was originally published by The Motley Fool
Yahoo
2 hours ago
- Yahoo
An OpenAI exec says she was diagnosed with breast cancer and that ChatGPT has helped her navigate it
Kate Rouch, OpenAI's chief marketing officer, said she was diagnosed with breast cancer. Rouch said she is expected to make a full recovery and urged other women to prioritize their health. She said she leaned on OpenAI's ChatGPT to navigate her treatment. Kate Rouch, the chief marketing officer at OpenAI, shared on Friday that she was diagnosed with invasive breast cancer weeks after assuming the role, which she called her "dream job," in December. In a thread posted on X, Rouch said she was sharing her story to help other women, adding, "We can't control what happens to us--but we can choose how we face it. My biggest lesson: no one fights alone." Prior to joining OpenAI as the company's first CMO, Rouch was CMO at Coinbase and, before that, spent over a decade at Meta, including as vice president, global head of brand and product marketing. Rouch said she started treatment right around the Super Bowl in February, when OpenAI aired its first-ever ad, and that she has since gone through 13 rounds of chemotherapy while leading OpenAI's marketing team. She wrote that she is expected to make a full recovery. "It has been the hardest season of life — for me, for my husband, and for our two young children," Rouch said, adding she has been supported by OpenAI "at every step." "Silicon Valley can be brutal and transactional. And yet — I've never felt more held," she said, adding that "people showed up in incredible and unexpected ways." Rouch also said OpenAI's ChatGPT has helped her navigate her diagnosis and treatment, including by explaining cancer in a way that is age-appropriate for her kids, helping her manage the side effects of chemo, and creating custom meditations. "Experiencing our work as a patient has made OpenAI's mission feel more personal and important," she said. Rouch said she was sharing her story to encourage other women to "prioritize their health over the demands of families and jobs." "A routine exam saved my life. It could save yours, too," she said. Business Insider reached out to OpenAI for comment. Kevin Weil, the chief product officer at OpenAI, expressed support for Rouch in a reply to her thread. "We love you @kate_rouch!" he wrote. "Proud of you for telling your story and for being so full of fight." Read the original article on Business Insider
