Two leaders of the AI trade are being sent in very different directions by investors. With a rise of more than 1% on Tuesday, Alphabet continued a months-long surge driven by enthusiasm for the Google parent company’s AI tools, cloud computing, and chip business, moving it closer to a $4 trillion market value. Nvidia, on the other hand, saw a 2.6% decline, bringing the largest company in the world by market capitalization even closer to its $5 trillion valuation from just a few weeks ago.
Meta Platforms’ negotiations to spend billions on Google’s AI chips — one of the few alternatives to Nvidia’s — caused the divergence on Tuesday.However, this development strengthened a wider divide between the two index heavyweights, which has caused Nvidia to drop 12% and Alphabet to rise 15% this month.
AI trade leads Google to challenge NVIDIA’s dominance.
Investors were concerned about the volatility of the AI trade, a trend that recently rocked markets and had a significant impact on Nvidia, a key indicator of big-tech enthusiasm. At the same time, they gave Alphabet credit for its advancements in AI as well as the sustained success of its search and advertising divisions. After The Information revealed Meta’s interest in utilizing Google chips for data centers, Alphabet shares surged as much as 3.2% in early trading. Last year, Alphabet increased its production of semiconductors, which could lessen its dependency on outside suppliers.
Investors who were already anxious about circular financing, excessive spending, and escalating AI competition were sensitive to the news. A hyperscaler like Google entering Nvidia’s domain “tapped into a fear that was already there,” said Dan Morgan, senior portfolio manager at Synovus Trust. “Google does have pretty big muscles,” he said. “They’re not some little guy on the fence.”
Alphabet’s stock has also reached all-time highs due to a number of positive events, such as a court ruling that allayed concerns about a government split, an investment from Warren Buffett’s Berkshire Hathaway, and a favorable reaction to its Gemini 3 model. However, Nvidia and other AI stocks were among the biggest decliners on Tuesday. Oracle dropped 1.6%, Super Micro Computer fell 2.5%, and Advanced Micro Devices lost 4%.
Investors poured money into the majority of other industries in the meantime. Healthcare stocks led the way as eight of the S&P 500’s eleven sectors saw gains. The Dow had its best showing since August, rising 664 points, or 1.4%. While the Nasdaq only increased by 0.7%, the S&P 500 increased by 0.9%.
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