Based on recent stock market performance, Alphabet’s Google just gained an edge over OpenAI’s ChatGPT. Shares of Alphabet and its chip partner Broadcom have soared this quarter after the release of a new version of Gemini AI, while private OpenAI distributors Nvidia and Microsoft have underperformed. Google, once considered an AI laggard, surprised the market last month by releasing the equivalent Gemini 3 AI model, which outperformed several features of ChatGPT and GPT family models in industry benchmark tests. Google also released its latest custom silicon chip, a 7th generation Tensor Processing Unit called Ironwood, in November, followed by reports that the company was preparing to make the TPU available to companies outside of Google Cloud, adding a new revenue stream to the search giant. Nvidia and OpenAI share a close relationship. Nvidia’s GPUs power much of OpenAI’s ChatGPT model, and the two companies have a strategic partnership to deploy at least 10 gigawatts of AI data centers with up to $100 billion in phased investments from Nvidia. Microsoft is a major investor in OpenAI, owning nearly a third of the newly formed commercial company. Since Google released its Gemini 3 model on November 18th, the stock market has clearly decided that Alphabet is the leader in AI. Oson Kwon, chief equity strategist at Wells Fargo, pointed out this disconnect to clients in a note this week, saying the valuations of the proxy stocks speak for themselves. For the first time since 2016, the stock powering OpenAI’s ChatGPT model and Nvidia’s graphics processing units (GPUs) is trading at a discount on a relative forward price-to-equity basis compared to the stock powering Google’s Gemini AI model and the search company’s custom tensor processing units (TPUs), Kwon said. “Gemini/TPU stock is currently trading at a premium compared to its ChatGPT/GPU peers for the first time in almost a decade. The market is saying GOOGL is winning the AI race,” Kwon wrote in a note to clients. ‘Code Red’ OpenAI CEO Sam Altman may be getting the message the market is sending. The Wall Street Journal reported that Altman told employees on Monday that the company was announcing a “code red” effort to improve the quality of ChatGPT, slowing other products to focus on that effort. OpenAI is facing pressure from Gemini’s rapidly growing user base, which numbered around 650 million in October compared to 450 million in July. Nvidia is similarly battling concerns about Google’s chips. Some investors believe Google’s TPUs could usurp the advantage of Nvidia’s chips, especially after reports that Meta, one of Nvidia’s biggest customers, is considering using Google’s chips for its data centers. Nvidia said in a recent X post that the company is “one generation ahead of the industry” with more powerful chips than Google, after its stock price fell 3% following the report. GPUs handle a wide range of parallel computing tasks, while TPUs are used for specialized tasks. “Enthusiasm may be overdone, but one thing is certain: AI is no longer the tide that lifts all boats,” Kwon continued. “Trading is becoming more nuanced and idiosyncratic. The average pairwise correlation of Nasdaq 100 stocks has plummeted to an all-time low of 14%, suggesting that winners and losers are beginning to emerge.” Alphabet stocks significantly outperformed its “Magnificent 7” peers in November, with several tech stocks selling off. Google’s parent company’s stock is up more than 66% this year and about 30% this quarter. Investors could also see Broadcom’s surge as a sign of growing interest in TPUs, a type of application-specific integrated circuit (ASIC). Broadcom has helped Google design and manufacture its chips for years and dominates the custom ASIC market. Year-to-date, it’s up about 65%. GOOGL NVDA, AVGO 1Y Mountain One-year stock performance of Google’s parent companies Alphabet, Nvidia, and Broadcom. Meanwhile, Nvidia is under pressure after two years of blockbuster growth. The stock is up about 35% since the beginning of the year, but is down more than 2% this quarter.
