Nvidia vs. Alphabet: Which AI stock is better?

These businesses will probably be essential in the growth of the artificial intelligence market as the race has already begun.

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Many firms changed their strategies to incorporate artificial intelligence (AI) after start-up OpenAI surprised the tech industry in November 2022 with the release of ChatGPT, an advanced chatbot that can produce human-like text in response to requests. The AI industry was estimated to be worth $136.55 billion in 2022 by Grand View Research, and it is anticipated to rise at a compound annual growth rate of 37.3% through 2030 as the technology advances multiple sectors, including healthcare, education, consumer tech, and more.

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With the technology of the start-up already being integrated into Microsoft's cloud platform Azure, Microsoft's $1 billion investment in OpenAI in 2019 appears to be the best decision of all time. In fact, according to recent rumors, Microsoft is reportedly thinking about making a second $10 billion investment in OpenAI to increase its share of the lucrative industry.

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While Microsoft appears set to play a significant role in the development of AI, Nvidia (NVDA -2.79%) and Alphabet (GOOG -1.24%) (GOOGL -1.22%) are also expected to contribute to the growth of the sector in the long run. These businesses stand to benefit greatly from the rapidly growing industry, making their shares enticing investments.

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Nvidia or Alphabet: Which is the superior AI stock? Let's evaluate.

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Nvidia: Providing the AI of tomorrow

Nvidia, a pioneer in GPUs, manufactures hardware with the capability to run and create AI applications. As a result, the corporation probably has a significant part to play in the development of the sector.

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In November 2022, Nvidia made progress in artificial intelligence by collaborating with Microsoft's Azure to create a sizable cloud AI computer. With Microsoft's significant involvement in AI to date, Nvidia's relationship with the firm could prove to be incredibly profitable in the long run. The alliance will combine Azure with Nvidia's GPUs to "enable enterprises train, deploy, and scale AI, including massive, state-of-the-art models."

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Together with a promising partnership, Nvidia is also moving independently in the field of AI by providing creators and developers with a number of tools on its website to leverage its products to create AI software for a range of industries, including art, voice transcription, data science, and more.

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At the start of the year, Nvidia's stock price has increased 52% as a result of Wall Street's growing optimism regarding the company's AI possibilities. While the future positions of many firms in AI seem more speculative, Nvidia's actual contribution to the sector, made possible by its potent GPUs, makes its stock a dependable and alluring investment in the nascent market.

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Alphabet: The share that will rule AI

On February 2, Alphabet released disappointing fourth-quarter 2022 numbers, with sales of $76.05 billion, up 1% year over year but $440 million short of analysts' estimates. The corporation struggled throughout 2022 as a result of huge drops in advertising spending brought on by macroeconomic challenges. Alphabet, however, just declared a larger concentration on AI moving forward, which may turn out to be a successful reversal in the long run.

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The corporation has prioritized AI because Alphabet's search engine Google is now seriously threatened by the introduction of ChatGPT. Google responds to user questions with links, while ChatGPT is perhaps more beneficial because it offers complete responses. The software's recent integration into Microsoft's well-established Bing search engine has only made it more dangerous.

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Trade Algo reported on February 3 that Alphabet has committed close to $400 million in OpenAI rival Anthropic as one of its initial steps against Microsoft. Alphabet is correct to enter the AI business in response to recent advancements, but Google's dominant position in the search engine market will probably be difficult to overtake as a result of potential AI upgrades.

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As of December 2022, Alphabet has an 84% market share in search engines, compared to 8.9% for Bing. The Google corporation shouldn't have too much issue maintaining its market dominance if it can act promptly.

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Alphabet's other strong brands, including Android, YouTube, Waze, Fitbit, and the several services under Google, might potentially benefit from AI advancements and strengthen their positions in the fast-growing market in addition to their dominance over search engines.

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Which is the superior AI purchase then?

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It's difficult to compare the equities of Alphabet and Nvidia because one is currently more affordable while the other has a stronger foothold in AI. When comparing the forward price-to-earnings ratios of the two businesses, Alphabet's 19 and Nvidia's 51.7, it can be seen that Alphabet's stock represents a better value. But, Nvidia has a bigger advantage in the AI competition thanks to its GPUs and a relationship with Microsoft Azure.

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Nvidia is currently the superior AI stock as a result. Yet, choose the Google juggernaut if you want better value for your money and believe in Alphabet's future in the sector.

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