S&P500 and Nasdaq 100: Alphabet Strength Stands Out as NVIDIA Retreats on Valuation Concerns

Alphabet Breaks Away as AI Trade Rebalances in Late 2025

Alphabet just logged one of its strongest weeks of the year, up 6.77% while the rest of the Mag 7 slipped into the red — and traders are treating it as more than a one-off bounce. NVIDIA, the longtime poster child of AI euphoria, lost ground again as questions around valuations and growing competition kept sellers pressing. Bottom line: the AI trade didn’t unwind this week — it rotated.

Is Gemini 3.0 the Real Turning Point for Alphabet?

Pretty much. Gemini 3.0 landed on November 18 and immediately reset expectations around Google’s AI ambitions. The model’s jump in reasoning strength, multimodal responses, and that massive one-million-token window gave traders something tangible to anchor to. And unlike previous launches, Google pushed it straight into Search on day one — a signal of confidence the market clearly noticed.

The usage metrics didn’t hurt either. The Gemini app closing Q3 at 650 million monthly users, with queries tripling quarter-over-quarter, hinted at real monetization traction. Traders leaned into that story fast, especially with tech leaders like Marc Benioff calling the performance leap the biggest since the first ChatGPT wave.

Are Custom Chips the Threat NVIDIA Didn’t Want?

This is where sentiment really shifted. Reports that Meta is exploring a multibillion-dollar TPU adoption plan — plus earlier signs of Anthropic working with Alphabet’s hardware — hit NVIDIA right where its valuation is most sensitive. When an asset is priced for perfection, even a hint of credible competition can push traders to rethink the setup.

Google pushing TPUs beyond internal use gives it something NVIDIA can’t replicate: a full-stack loop that goes from chips to cloud to consumer. Analysts flagged it as a serious validation of Google’s hardware strategy, and traders responded like the AI field is finally opening up.

Why Didn’t NVIDIA’s Blowout Quarter Save the Stock?

The numbers were massive — 62% revenue growth to $57 billion — but the reaction said everything. Investors didn’t chase. Concerns over concentrated demand, circular AI investments, and stretched valuations kept sellers active even as Jensen Huang dismissed talk of a bubble.

The stock’s 10% drop this month, plus high-profile bears like Ray Dalio and Michael Burry leaning in, fed the idea that NVIDIA still has more to prove. Traders don’t doubt the business — they doubt the price.

Does Valuation Now Favor Alphabet?

That’s the market’s read. Alphabet trading around 29.6x earnings versus NVIDIA at 44.3x gives buyers more room to justify adding exposure. Berkshire’s $4.3 billion stake only strengthened the view that Alphabet isn’t just an AI growth story — it’s a value-tilted AI story. And with Google Cloud growing 34% year over year while margins improve, the monetization path looks cleaner than it has all year.

So Where Does the Trade Go from Here?

Sentiment tilts toward Alphabet for now. Analysts see upside in TPU licensing and potential Meta demand, and they’re still cautious on treating NVIDIA’s pullback as automatic dip-buying territory. The market wants proof that NVIDIA can hold its dominance as customers explore alternatives.

If AI spending stays strong and Alphabet keeps showing real monetization through search, cloud, and hardware, traders may keep favoring it into early 2026 — while NVIDIA works to convince the street that its premium is still worth paying.

More Information in our Economic Calendar.