Market AnalysisMay 08, 20262 Min

Alphabet Edges Closer To Nvidia In Race For World’s Most Valuable Company

Alphabet is on the cusp of overtaking Nvidia as the world’s most valuable company. The company’s record stock rally is fuelled by its artificial intelligence efforts and booming cloud business.

If the shift materialises, it would mark a significant moment for the Google parent. It last held the top position briefly in February 2016, before being overtaken again.

Shift In Market Sentiment

The shift highlights just how quickly sentiment around Alphabet has changed. The company is no longer seen only as a cloud-led AI services provider. It is also emerging as a serious challenger to Nvidia in the chip space, thanks to its custom-built processors that have already attracted clients such as Anthropic.

Cloud Growth Drives Performance

In recent months, Alphabet has caught Wall Street off guard with cloud growth that has comfortably beaten expectations and even outpaced larger rivals like Amazon and Microsoft.

• Google Cloud revenue jumped 63% in the first quarter
• The growth was well above analyst expectations
• It marked the highest growth rate since the company began reporting the segment separately in 2020, according to LSEG data

That performance has strengthened investor belief that Alphabet’s massive spending on AI, running into hundreds of billions of dollars, could potentially start delivering meaningful returns.

Increase in Investor Confidence

Alphabet’s shares have risen by about 24% this year, sharply outperforming Nvidia, whose stock is up roughly 7%. Nvidia’s shares had come under pressure after the Wall Street Journal reported last month that OpenAI had missed its targets for new users and revenue.

The valuation gap between the two companies has tightened considerably:

• Nvidia’s market capitalisation stood at about $4.7 trillion as of May 5, below its peak of around $5.2 trillion
• Alphabet’s valuation reached $4.6 trillion, hovering near record highs

Valuation Metrics In Focus

Alphabet’s rising valuation has also pushed its multiples higher.

• The stock trades at around 29 times its 12-month forward earnings
• This is above its five-year average of 22
• It also exceeds the S&P 500’s average of about 21 times

In comparison, Nvidia trades at roughly 21 times forward earnings.

Interestingly, at around $4.5 trillion in value as of the last close, Alphabet now exceeds the combined worth of Germany and Switzerland’s main stock markets. This highlights the scale of its rise as it edges closer to the top spot once again.

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