Nvidia vs. Alphabet: The AI Revolution Is Big Enough for Both. Here's the Better Buy.

The artificial intelligence (AI) revolution keeps delivering winning stocks driven by that technology. Since AI encompasses so many niches within tech, it will make numerous investors better off, and the gains will not be limited to just one investment.

Nvidia (NASDAQ: NVDA) and Google's parent company, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), are two notable winners. The latest iteration of AI is built on Nvidia's hardware, while Alphabet has long innovated in the field, and the success of its most notable businesses relies heavily on AI.

Still, between the two tech stocks, I believe Alphabet may have the slightly brighter future. Here's why.

Image source: The Motley Fool.

So why not Nvidia?

Admittedly, it is difficult to go against Nvidia in any AI race. Its AI accelerators power generative AI, and while other competitors have emerged over time, Nvidia's hardware remains dominant.

In the first two quarters of fiscal 2027 (ended July 26), that dominance drove a 96% year-over-year increase in revenue for the company. This is not an anomaly, as the growth of Nvidia's AI accelerator business has been unprecedented in recent years.

Amid that growth, the stock has gained 1,460% from its October 2022 low. That gave it the world's largest market cap and a surprisingly modest price-to-earnings (P/E) ratio of 23, below the S&P 500 average earnings multiple of 26.

Nonetheless, the immediate problem is how the company has driven this growth. Increasingly, Nvidia has loaned money to customers to buy equipment. Should some of them declare bankruptcy, the company could be in for massive write-offs.

According to its latest 10-Q filing with the Securities and Exchange Commission (SEC), 70% of its accounts receivable balance comes from just five customers. Amid that lack of diversification, this is not a concern Nvidia investors should dismiss.

How Alphabet stands out

In contrast, Alphabet appears poised to benefit from present and future growth, though that comes with some challenges.

Since Nvidia's 2022 low, Alphabet stock has risen by a more modest 190%. Moreover, its $160 billion in capital expenditures (capex) may seem concerning. The free cash outflows during the last two quarters and the sudden need to increase borrowing may worry shareholders who bought Alphabet for its financial stability.

Alphabet appears to surpass Nvidia in unrealized growth potential.

With that, its spending may be paying off, and one way is in the growth of Google Cloud. Alphabet's overall revenue grew 24% in the first nine months of 2026. However, that pales in comparison to Google Cloud's 84% revenue increase for the same period.

Additionally, Google Cloud generates 21% of the company's revenue. In contrast, Nvidia's data center segment accounts for more than 92% of its revenue. Although Alphabet also finances some of its customers, these percentages suggest it is less exposed to this risk than Nvidia.

Furthermore, Alphabet's next great revenue stream could come from Waymo, its autonomous driving company. CEO Sundar Pichai believes Waymo could "meaningfully contribute" to the company's revenue as soon as 2027. While this will almost certainly take years to materialize, it is likely not figured into Alphabet's stock price, leaving considerable room for growth.

Finally, investors can buy this stock right now for just 15 times earnings. That valuation arguably makes it worth buying on this pullback.

Nvidia vs. Alphabet

Nvidia and Alphabet are both doing their part to power the AI revolution, but while nobody should discount Nvidia's successes, Alphabet's stock seems to offer greater future growth potential.

This comes down to two factors: data center exposure and Waymo's growth. Although Alphabet could get hit if some of its customers go bankrupt, its exposure is a small fraction of what Nvidia faces.

Moreover, the Waymo growth story has not yet really started, suggesting the Google parent could experience a huge revenue surge in the coming years. Although Nvidia's growth story is probably far from over, Alphabet looks to have more remaining growth potential.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.