Nvidia vs Alphabet: Which Stock Will Outperform in 2026? | The Motley Fool

The two top-performing " Magnificent Seven " stocks in 2025 were Nvidia ( NVDA +1.51%) and Alphabet ( GOOGL +0.85%) ( GOOG +0.88%). As of this writing, Nvidia's stock is up around 30%, while Alphabet has turned in a 60% gain. Let's see which stock is poised to outperform in 2026. The case for Nvidia Where artificial intelligence (AI) infrastructure spending heads, Nvidia's stock is likely to follow. The company is the dominant player in the space with its graphics processing units (GPUs) , and while competition has increased, no one is close to unseating the king. It still has a wide moat with its CUDA software platform, which is where most foundational AI code has been written, while its recent acquisition of SchedMD will only help widen its software moat. Image source: Getty Images. Meanwhile, its NVLink interconnect system helps prevent vendor mixing and matching because it's a proprietary system that lets its GPUs quickly pass along data and pool memory, allowing an AI cluster to act as a single powerful unit. NASDAQ: NVDA Key Data Points Meanwhile, the setup for the company looks attractive heading into 2026. All the major cloud computing companies have discussed ramping up data center capex spending next year, which bodes well for it. At the same time, the U.S. just gave it the green light to start selling its H200 chip to commercial Chinese customers, reopening a big market for it. In addition, large customer OpenAI is close to closing $100 billion in new funding, which should help it with its aggressive AI data center buildout. On top of that, Nvidia's stock is attractively valued, with a forward price-to-earnings (P/E) ratio of under 23 times 2026 analyst estimates and a price/earnings-to-growth (PEG) ratio of less than 0.7 times. Positive PEGs below 1 are generally viewed as undervalued. The case for Alphabet Alphabet's biggest advantage is that it is the one major hyperscaler (owner of large data centers) that isn't largely reliant on Nvidia. The company developed its own custom AI chips over a decade ago, and today most of its internal workloads are run on its tensor processing units (TPUs). That has given the company both a cost advantage with its cloud computing business, as well as with training its Gemini large language model (LLM) and running AI inference . NASDAQ: GOOGL Key Data Points Google Cloud has been a huge growth driver for Alphabet, and that should only continue in 2026 as the unit has been capacity-constrained. Alphabet has been spending aggressively, which should result in Google Cloud's growth accelerating. Alphabet also made an under-the-radar move the past couple of years with its chips that could lead to big growth. TPUs were originally designed for Google Cloud's TensorFlow framework, but Alphabet shifted its chips to be more framework agnostic, including supporting the popular PyTorch framework. This move allows it to rent out its TPUs to other companies. Anthropic is one of the first companies to jump on this opportunity, agreeing to deploy...

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