Forget Nvidia: 1 Artificial Intelligence (AI) Stock to Buy Instead

There might be no company that represents the artificial intelligence (AI) boom quite like Nvidia (NVDA -0.79%). The thriving chipmaker is firing on all cylinders right now. And it has rewarded its shareholders in remarkable fashion.

I’m sure you’re looking at ways to gain exposure to the ongoing AI trend. However, perhaps it’s best to forget about Nvidia. Instead, consider buying this other “Magnificent Seven” stock instead.

High expectations for Nvidia

Nvidia impressed investors once again with a fantastic financial report. During the three-month period that ended April 28 (Q1 2025), the business revealed that revenue skyrocketed 262% year over year to $26 billion. Operating income was even more impressive, up 690%.

Demand for Nvidia’s chips is as robust as ever, particularly in the data center segment. Looking ahead, executives believe sales will be $28 billion in the current fiscal quarter. While that would mark a quarter-over-quarter and year-over-year slowdown, it still would mean huge growth for the business.

Unsurprisingly, the hype for Nvidia continues to soar as well, as the market remains enamored with AI-focused businesses. Shares trade at a nosebleed price-to-sales (P/S) ratio of 35.9, indicating just how lofty investors’ expectations are. Nvidia looks to be priced for perfection right now.

Investors who want to buy Nvidia shares today are probably not too happy that they missed the stock’s monumental rise. This might be a bold statement, but at this point, I think it’s a perfect example of people trying to chase returns, which isn’t a smart investment strategy.

Dominant internet firm

It’s hard to tell investors to ignore one of the hottest stocks in the market. But there’s a business that is posting strong results that is already a leader in AI. I’m talking about Alphabet (GOOGL 0.23%) (GOOG 0.23%). The $2.2 trillion company has been a big winner for shareholders, and it’s poised to continue this trend.

Despite generating a sizable $307 billion in sales last year, Wall Street consensus analyst estimates call for revenue to increase at a compound annual rate of 11.5% between 2023 and 2026. That growth is going to come from greater usage of Alphabet’s numerous products and services, which will help drive more digital ad revenue. Here’s where AI will help.

Sundar Pichai, Alphabet’s CEO, proclaimed back in 2016 that the world was going to transition from mobile to an AI-first focus. This kind of thinking early on has put the business at the forefront of this emerging technology.

Alphabet has such a massive user base, with six products being used by at least 2 billion people, that it’s effortless to ship new AI features with almost instant mass adoption. Some of the most well-known services, like Photos, Maps, Gmail, and YouTube, have long utilized AI in some form.

And when it comes to Google Cloud, there is more of an opportunity to have a bigger impact. As the industry’s third-largest player with first-quarter revenue of $9.6 billion, this segment is becoming a mission-critical tech infrastructure partner for its client base. Customers can use a wide range of tools, like generative AI, machine learning, and speech and text features, to build their own applications.

It’s understandable that investors gravitate toward the hot new business or stock in order to ride the momentum to quick profits. But with AI, this dominant internet firm looks to be in a favorable position to benefit. Alphabet has almost unlimited financial resources, as exemplified by $108 billion in cash, cash equivalents, and marketable securities, to invest aggressively in servers and network infrastructure to strengthen its position in the AI race.

Shares trade at a P/S ratio of 7.2, which is significantly more reasonable than Nvidia’s valuation. Consequently, I believe Alphabet is the one AI stock investors should look to buy instead of the high-flying GPU stock.