Nvidia and Alphabet Signal Next Phase of AI Boom

January 3, 2026 at 19:12 UTC

5 min read

Nvidia and Alphabet AI boom visual with chip sales and generative AI traffic growth trends

Key Points

Nvidia projects $65 billion in Q4 revenue as AI chip demand accelerates
Alphabet’s Gemini now holds 18% of generative AI web traffic
Analysts see Nvidia, Alphabet among core long-term AI leaders
Institutional investors continue to build sizable Alphabet positions

Nvidia’s record outlook underscores persistent AI demand

Nvidia is projecting revenue of $65 billion for its fiscal 2026 fourth quarter, reinforcing expectations that demand for artificial intelligence infrastructure remains strong. The forecast implies a 65% year-over-year increase from the prior-year quarter’s $39.3 billion, which was itself a record, and follows fiscal third-quarter revenue of $57 billion, up 62% from a year earlier. Chief Financial Officer Colette Kress said demand for AI infrastructure "continues to exceed our expectations," citing robust orders for the company’s Blackwell platform and its successor, Vera Rubin, scheduled to launch in the second half of 2026. Kress added that Nvidia currently has visibility to $500 billion in combined Blackwell and Rubin revenue from the start of 2025 through the end of 2026. The company’s data center business remains the primary driver of this growth, as cloud providers and enterprises expand capacity for training and running AI models. Nvidia’s share price rose about 39% in 2025, contributing to broader debate over whether AI-related equities are in a bubble. Chief Executive Jensen Huang addressed those concerns on the fiscal third-quarter call, arguing that the industry is undergoing three major platform shifts: a move from CPU-based to accelerated computing, the rise of generative AI, and the emergence of agentic and physical AI applications such as robotics and self-driving vehicles.

Alphabet expands AI footprint with Gemini and TPU strategy

Alphabet is emerging as a key software and infrastructure player in the same AI buildout that is driving Nvidia’s growth. Its Google Gemini chatbot has increased its share of generative AI web traffic to 18%, more than triple its level a year earlier, according to Similarweb data cited in recent coverage. Over the same period, OpenAI’s ChatGPT share declined from 87% to 68%. Alphabet has integrated Gemini across its core products, including the Chrome browser, Android, Google Search, and Google Workspace tools such as Gmail and Docs, and is monetizing the assistant through subscription tiers that support tasks from image and video generation to research and writing. Beyond software, Alphabet is exploring broader commercialization of its in-house Tensor Processing Units. AI company Anthropic said in October it plans to expand its use of Google Cloud technologies to as many as one million TPUs, expecting to spend "tens of billions of dollars" and bring more than 1 gigawatt of AI computing capacity online in 2026. Subsequent reports indicated Meta Platforms is also considering multi‑billion‑dollar TPU purchases. Analyst commentary cited in one report suggested that selling TPUs to third parties could eventually give Alphabet a fifth of the AI chip market, representing a potential $900 billion revenue opportunity, compared with just over $385 billion in Alphabet’s trailing 12‑month revenue.

Market views on an AI bubble and shifting leadership

The strength of Nvidia and Alphabet has fed concerns about an AI bubble, drawing attention from high‑profile investors. One article noted that Michael Burry has taken bearish positions in some of the biggest AI winners, including Nvidia and Palantir, and raised questions about accounting practices such as GPU depreciation schedules. However, that analysis also suggested that AI excesses might be corrected through rolling, stock‑specific pullbacks rather than a broad crash, with richly valued names like Palantir more exposed than larger, more diversified firms. Alphabet was highlighted as an AI trade that could be relatively insulated from such corrections due to what was described as a cheaper valuation compared with some peers. Another piece argued that AI infrastructure spending has shifted from experimental budgets to permanent line items, benefiting large, established providers. Across several surveys of top AI stocks, Nvidia, Microsoft, and Alphabet were repeatedly cited as core holdings, with Palantir and specialized cloud provider CoreWeave offering higher‑risk, higher‑growth exposure. These assessments framed Nvidia as the dominant GPU supplier for AI workloads and Alphabet as a beneficiary of AI‑enhanced search, advertising, and cloud services.

Alphabet’s financial performance and investor positioning

Alphabet’s recent financial results and trading activity reflect how AI expectations are feeding into its broader business. For the quarter ended Oct. 29–30, Alphabet reported revenue of $102.35 billion, up 15.9% year over year, and diluted earnings per share of $2.87, beating the consensus estimate of $2.29. Net margin reached 32.23%, and return on equity was 35%. Google Search, described as the most mature part of the business, still delivered 15% revenue growth in the third quarter, while overall company revenue rose 16% and EPS increased 35% in 2025, according to one article. Alphabet shares gained about 65% in 2025 and now trade around 30–31 times forward earnings, with several reports noting that valuation is more in line with peers after last year’s rebound. Institutional interest remains significant: one filing showed HM Payson & Co. holding over 1.2 million Alphabet shares, while other asset managers such as SWS Partners and Burney Co. increased positions, and institutional ownership was reported at about 40% for Class A shares. At the same time, insiders including CEO Sundar Pichai and other executives have sold stock in recent months, transactions that some coverage suggested could weigh on near‑term sentiment. Despite valuation jitters and regulatory overhangs, analyst coverage remains broadly positive. Multiple firms have raised price targets into the $300–340 range, and aggregated data across several reports show a consensus "Buy" or "Moderate Buy" rating, with only a small number of Hold or Sell recommendations.

Key Takeaways

Nvidia’s sharply higher revenue guidance and large Blackwell and Rubin order visibility indicate that AI infrastructure spending remains in an expansion phase rather than plateauing.
Alphabet is positioning itself across both AI software and hardware, using Gemini to capture user traffic while exploring TPU sales that could open a substantial new revenue stream.
Market commentary suggests AI risk may manifest through selective corrections in highly valued names rather than a broad collapse, with diversified giants like Alphabet and Nvidia still viewed as central long-term beneficiaries.