Google is winning the AI race – isn’t it?
Recent headlines – “Why Google is winning the AI race”, “5 reasons Google has never looked stronger”, “Google is suddenly beating its magnificent seven peers in the AI race” – suggest as much.
So does the share price of Google parent Alphabet: the stock is now up some 70 per cent this year, more than twice as big as Nvidia’s gains. Indeed, Alphabet’s market capitalisation recently came within touching distance of $4 trillion (€3.45 trillion), not far behind Nvidia and Apple. Google’s reputation has shifted from playing catch-up in AI to the possibility that it’s now setting the pace.
How quickly market narratives can change. In July, Nvidia was worth almost twice as much as Alphabet, which at that point sat below Amazon in the rankings and only narrowly ahead of Facebook parent Meta. Just last month, Nvidia was valued at $5 trillion, $2 trillion more than Alphabet. By late November, the gap had shrunk to “just” $300 billion. Meanwhile, Alphabet’s near doubling over the last six months means it’s now worth more than twice as much as Meta.
We see a similar dynamic with Apple. A year ago, it was the most valuable firm in the world and was the heavy favourite to become the world’s first $4 trillion company. The narrative changed abruptly; dismissed as an AI laggard, it was overtaken by Microsoft and then swept aside by Nvidia’s surge.
Now the pendulum has swung again, with Apple recently climbing back to the point where it was within reach of Nvidia’s valuation. What looked like timidity and under-investment in AI now reads like capital discipline – for now anyway.
Even with trillion-dollar stocks, stories matter as much as spreadsheets, and stories change all the time. Forecasts about who is ‘winning’ the AI race tend to age poorly. A little humility is always the safer bet.
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