AI trade splinters as Google challenges Nvidia’s dominance

Investors are sending two leaders of the AI trade in opposite directions.

- Imani Moise, Peter Rudegeair, & Robbie Whelan

Alphabet took another step toward $4 trillion in market value on Tuesday, rising more than 1% to extend a monthslong rally fueled by enthusiasm for the Google parent’s AI tools, cloud computing and chip business. Nvidia shares slid 2.6%, dragging the world’s biggest company by market capitalization further below a $5 trillion valuation reached just weeks ago.

Tuesday's divergence followed news that Meta Platforms is in talks to spend billions of dollars on Google's AI chips, one of the few alternatives to Nvidia’s. But that was just the latest in a split between the two index heavyweights that this month has driven Alphabet 15% higher and Nvidia 12% lower.

Worries about the AI trade that buffeted markets recently have weighed particularly heavily on Nvidia, a bellwether of investors’ enthusiasm for big tech. At the same time, Alphabet has defied the trend, with investors rewarding the company for both its Al advances and its strong core advertising and search businesses.

Alphabet shares climbed as high as 3.2% in early trading after The Information reported the talks with Meta about using Google chips to run its data centers. Alphabet last year increased production of semiconductors, an effort that potentially reduces reliance on outside vendors.