Should You Forget Nvidia and Buy This Tech Stock Instead?

Nvidia's business is thriving, but its stock price remains lofty. This raises a significant question: should you consider a more attractively priced tech giant such as Alphabet instead?

The surge in artificial intelligence (AI) has propelled Nvidia (NVDA) shares upward for two years. Can this trend continue, or is it time to shift your attention to a more affordable tech stock like Alphabet (GOOG)?

The Positive Outlook for Nvidia

Nvidia achieved annual sales of $27 billion in fiscal year 2023. In less than two years, this figure has skyrocketed to over $113 billion in trailing 12-month revenue. This marks a remarkable period for both Nvidia and its investors.

As one of the world’s premier companies, Nvidia is not only highly valued but also ranks high in profitability. With Nvidia providing the hardware for OpenAI's revolutionary ChatGPT, it is clear that demand is surging as businesses endeavor to create their own AI solutions.

Although the stock seems pricey at 54 times adjusted earnings and 30 times sales, these ratios have seen higher peaks. Investors who entered during the peak valuation period might have enjoyed a 139% gain by late December 2024. Thus, some argue that Nvidia shares appear more accessible now, potentially aiming for strong long-term returns.

The Positive Outlook for Alphabet

If Nvidia's performance is impressive, the figures from Alphabet are equally noteworthy. Over the past year, Alphabet generated $340 billion in revenues, with $55.8 billion converting into free cash flow. While Nvidia is achieving robust results, Alphabet’s performance has been somewhat constrained due to a downturn in the online advertising market, which has affected its latest sales figures.

Despite this, Alphabet made substantial investments in data centers and infrastructure improvements totaling $49 billion within the last year. Currently, Alphabet shares are trading at about 26 times earnings and 7.1 times sales, making them seem quite valuable in comparison to Nvidia.

There are many reasons to consider investing in Alphabet in 2024. To summarize, Alphabet is built for long-term success in an ever-evolving economy, is heavily engaged in the AI boom from a software perspective, and is currently available at a reasonable price. There appears to be much to appreciate about Alphabet.

Why Choose Alphabet Over Nvidia?

While Nvidia's prospects are promising, the company's growth is already reflected in its stock price. Although it might continue to climb, a downtrend in its valuation ratios seems likely over time. Furthermore, as new competitors emerge in the market, Nvidia's leading position could diminish.

Therefore, while holding onto Nvidia shares may be wise, increasing your investment may not be advisable. On the other hand, Alphabet presents an excellent combination of a solid business and an affordable stock price. Moreover, the digital advertising sector is picking up after the recent downturn, and revenue from Alphabet's Google segment is expected to rise significantly in the next few years.

In conclusion, while Nvidia is a reasonable long-term hold, Alphabet stands out as a top choice for investment that should be added to any diversified portfolio. If you haven’t yet incorporated this remarkable stock into your holdings, now may be the perfect time to click on Alphabet’s buy option.

Nvidia, Alphabet, Stocks