As the company supplying 80% of the necessary training chips, Nvidia was arguably the biggest winner in 2023’s artificial intelligence (AI) boom. That said, it makes sense for investors to diversify their holdings to target different sides of the long-term opportunity. Let’s look at why Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Meta Platforms (NASDAQ: META) could also have a place in your portfolio in 2024 and beyond.
1. Alphabet
With a market cap of $1.79 trillion, Alphabet is already the fourth-largest company in the world, and it will take a lot of momentum to power continued expansion. But AI may be able to do the trick. The tech giant is heavily incorporating AI infrastructure into its cloud-computing platform, which could generate much-needed diversification and long-term growth.
Among AI companies, Nvidia is particularly successful because it targets the “picks and shovels” side of the opportunity, minimizing competition while maximizing the total addressable market for its products. Google is developing a similar strategy (albeit higher on the value chain) by turning Google Cloud into a one-stop shop for all its enterprise clients’ data-management and AI training needs. And while Google isn’t the only cloud-service provider employing this strategy, it has some key advantages.
Image source: Getty Images.
According to CEO Sundar Pichai, 70% of generative AI start-up unicorns use Google’s infrastructure to train and run their models. This is a big vote of confidence in the platform’s quality and price point. And Google plans to build on this advantage with proprietary AI chips (called tensor processing units), which can bring down costs through vertical integration and reduce the company’s reliance on third-party suppliers like Nvidia.
Alphabet’s low valuation is icing on the cake for investors. With a forward price-to-earnings (P/E) multiple of just 22, the stock is significantly cheaper than the NASDAQ 100‘s estimate of 29.
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2. Meta Platforms
Following the release of ChatGPT in late 2022, Meta’s share price has been on a tear, jumping a…
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