Key Points
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Nvidia just reported a strong quarter with 73% year-over-year revenue growth.
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Palantir’s U.S. commercial revenue skyrocketed 137% in its latest quarter as enterprise adoption accelerated.
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Alphabet’s more diversified business and accelerating Google Cloud segment make it the best bet at its current valuation.
- 10 stocks we like better than Alphabet ›
Investors have flocked to artificial intelligence (AI) stocks over the past couple of years. And it’s easy to see why. The growth coming from the sector’s top players is staggering.
But separating a good business from an attractive stock is where investing gets tricky. When comparing three of the biggest AI winners — Nvidia (NASDAQ: NVDA), Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), and Palantir Technologies (NASDAQ: PLTR) — one arguably offers a superior balance of business quality and valuation.
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Nvidia’s hardware dominance
It is hard to find any flaw in Nvidia’s underlying execution. In its fiscal fourth quarter of 2026 (the period ended Jan. 25, 2026), the AI chipmaker reported revenue of $68.1 billion, which was up a striking 73% year over year.
And its data center segment continues to power the story. Data center revenue hit $62.3 billion for the quarter, up 75% year over year.
“Agentic and physical AI applications built on increasingly smarter and multimodal models are beginning to drive our financial performance,” explained Nvidia chief financial officer Colette Kress in the company’s fiscal fourth-quarter earnings call.
But Nvidia trades at a price-to-earnings ratio of about 41 as of this writing. While this isn’t necessarily egregious for a hyper-growth company, it could leave investors exposed if the cyclical nature of semiconductor spending causes demand to cool.
Palantir’s AI data platform is resonating with customers
Palantir is seeing similarly explosive momentum — but in the software space. In the fourth quarter of 2025, revenue jumped 70% year over year to $1.4 billion.
Even more impressive was its U.S. commercial segment, which skyrocketed 137% year over year as enterprises rushed to implement Palantir’s AI data platform.
“We are an n of 1, and these numbers prove it,” noted Palantir CEO Alex Karp in the Q4 earnings release.
Palantir is executing brilliantly. But the market has arguably already priced in years of this perfection. Trading at a price-to-earnings ratio well over 200, the stock’s valuation leaves little room (if any) for error. If growth decelerates even slightly, the stock could face a severe correction.
Alphabet’s diversified resilience
This brings us to Alphabet. The tech giant’s most recent quarter showcased a company that is not only benefiting from AI but also doing so atop a more diversified and robust foundation.
Alphabet’s fourth-quarter 2025 revenue rose 18% year over year to $113.8 billion.
“It was a tremendous quarter for Alphabet and annual revenues exceeded $400 billion for the first time,” said Alphabet CEO Sundar Pichai in the company’s fourth-quarter earnings release.
The real standout, however, was Google Cloud. Revenue for the cloud computing segment surged 48% year over year to $17.7 billion — a significant acceleration from 34% growth in the prior quarter. As businesses scramble to build AI models, they are increasingly turning to Google Cloud’s infrastructure.
Further, Alphabet boasts a much more sensible valuation. Trading at a price-to-earnings ratio around 31, investors get a massive, highly profitable advertising business with a rapidly accelerating cloud segment attached.
The better buy
All three companies could continue to perform well. But Alphabet, thanks to its more diversified business and cheaper valuation, arguably looks like the best bet for investors deploying new capital today.
While Nvidia and Palantir are much faster-growing businesses, Alphabet offers a more robust business model with multiple levers for growth, including YouTube, Google search, Google Cloud, and its Gemini AI. In addition, while the company is attacking the AI opportunity directly with Gemini and Google Cloud, its existing core Google search business is benefiting as well.
“Search saw more usage in Q4 than ever before, as AI continues to drive an expansionary moment,” said Alphabet CEO Sundar Pichai during the company’s fourth-quarter earnings call.
Overall, Alphabet offers investors a way to tap into the AI boom as part of a broader, more diversified business — and do so at an attractive valuation.
Of course, investors buying the stock should consider the risks. While there are a number of risks, one worth noting is the company’s heavy spending. To keep up with the opportunities in AI, Alphabet said it expects 2026 capital expenditures to total between $175 billion and $185 billion. This is an extraordinarily large figure that will likely negatively impact Alphabet’s free cash flow in the near term. In addition, the sheer size of the investment raises the bar for the company to achieve a good return. So, investors will have to watch closely to see if these investments are paying off over time.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.