everyone knows NVIDIA (NASDAQ: NVDA) is one of the most popular stocks on the market today. Not only is it one of the most valuable stocks with a market capitalization of $3.24 trillion on January 13, but it's also heavily traded. In recent weeks, about $28 billion in Nvidia stock has been transferred from one investor to another every day. This is better than all USD based transactions apple, Microsoftand Amazon.
So it's no surprise that a Motley Fool research report found that Nvidia stock is in nearly every hedge fund managed by a well-known billionaire. Analyzing 16 such funds, 10 list Nvidia among their 10 largest holdings.
But Nvidia isn't the most popular name in this report. Among them, 11 listed hedge funds letter (Nasdaq: Google) (Nasdaq: Google) As a top 10 holding company, tied with the parent company of Facebook and Instagram meta platform.
Alphabet's two share classes have a combined daily trading volume of $9.2 billion, well behind Nvidia's headlines. Meanwhile, Alphabet shares are up about 35% last year, while Nvidia has returned 145%.
I'm not saying you should completely forget about Nvidia, but this might be a good time to lock in some of your profits in the stock and move the resulting cash to Google's parent company. Here’s why.
Let's start with Alphabet's enticing qualities. This topic can get quite long, but I'll keep it short here:
Do you want digital advertising? There may be plenty of options, but none can challenge Google's massive market footprint. This business is no small matter. Last year, the company generated $258 billion in revenue and $115 billion in operating profit. Nvidia's sales stalled at $113 billion during the same period.
The company is very flexible. Management changed its name from Google to Alphabet to make investors and potential customers more comfortable with products and services that may not be related to its core search and advertising businesses. Now, 13% of the company's quarterly sales come from Google Cloud services. Another 11% comes from the YouTube video sharing platform. Alphabet's smaller businesses with huge long-term potential include medical research, self-driving cars and high-speed internet services.
Alphabet was a leader in artificial intelligence (AI) before it became popular. The DeepMind subsidiary was founded in 2010 and took early steps toward creating general artificial intelligence systems. Its AlphaZero chess engine, which attracted attention in 2017, learns the game by playing millions of games against itself and reaches its own conclusions within 24 hours. The resulting system was arguably the best chess computer of its time. The research that led to these headline-worthy highlights (and more) never stops. Google and Alphabet must have a vast array of AI systems at their disposal, some of which could have game-changing consequences.
The stock is worth $2.3 trillion today, but still looks affordable. Alphabet's A-share earnings ratio is 25.3 times and sales are 6.9 times. This is a very cheap valuation compared to Nvidia's corresponding ratios of 52.5 and 28.8.
Over the long term, Nvidia stock will likely increase shareholder value, even if priced at a premium. But the days of quick and easy gains may be over. The artificial intelligence boom has ushered in a golden age for Nvidia and its investors, but how long will it last and what happens next? I'm not a big fan of a narrow business plan focused on AI like Nvidia's.
Alphabet, on the other hand, started out as a one-trick pony called Google, but has now moved on to bigger things, exploring a host of promising business ideas. That's what I want to see in a long-term portfolio. I can't complain about Alphabet's affordable stock price, either.
All in all, Alphabet stock is doing much better than Nvidia stock right now. I'm not saying you should forget about Nvidia -- I'm just not recommending buying more of these expensive stocks in early 2025.
Before buying Alphabet stock, consider the following factors:
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Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. John Mackey is the former CEO of Amazon subsidiary Whole Foods Market and a board member of The Motley Fool. Randi Zuckerberg is the former director of market development and spokesperson for Facebook, the sister of Meta Platforms CEO Mark Zuckerberg, and a board member of The Motley Fool. Anders Bylund has worked at Alphabet, Amazon and Nvidia. The Motley Fool has positions and recommendations for Alphabet, Amazon, Apple, Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.
Should you forget about Nvidia and buy this tech stock? Originally posted by The Motley Fool