This year has been a pretty wild ride for the stock market so far. Both Nvidia (NASDAQ: NVDA) and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) are down this year.
Alphabet has tumbled 6.6% this year while Nvidia is down 6.38%.
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You might think this looks like a good buying opportunity, and you’d be right. But which dip should you consider buying?
Alphabet looks like the stronger of the two from where I’m standing. Financially, both companies are doing quite well, but Alphabet is in the stronger position in terms of the broader AI market. It not only threatens Nvidia’s hardware dominance but the rising stars of ChatGPT and Claude as well.
Nvidia became the most valuable company in the world by market cap due to its hardware.
All of the major artificial intelligence (AI) software companies use Nvidia’s graphics processing unit (GPU) to some degree.
But many companies, namely OpenAI, the company behind ChatGPT, are looking to move toward custom hardware more in tune with the needs of AI specifically.
Nvidia is still on the top of the AI hardware heap, but it has a few companies nipping at its heels, namely Broadcom and Advanced Micro Devices.
And Broadcom has partnered with Alphabet to develop the tensor processing unit (TPU), which represents a direct challenge to the GPU in AI deployments.
Not only is Alphabet lessening its own dependence on Nvidia hardware, Anthropic, OpenAI’s main rival, is eagerly adopting the TPU. It’s looking to bring 1 gigawatt of computing capacity online with TPU chips by the end of 2026 .
It’s early, but it seems that the AI hardware is more easily replaced than software. Clearly, Anthropic’s Claude runs just as well if not better on a TPU than a GPU. And both Claude and Google’s Gemini (an Alphabet entity) have been gaining market share rapidly.
That means Alphabet likely has a wider moat than Nvidia, and it’s the one you should consider buying on the current-year dip. It has both a hardware competitor to Nvidia’s GPU and a software competitor to OpenAI and Anthropic.
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