Nvidia’s Playbook: How Long-Term Innovation Paid Off
When Nvidia introduced the graphics processing unit (GPU) in 1999, the chip was mostly targeted at gamers and designers. Few could have predicted that GPUs would later fuel the artificial intelligence (AI) revolution.
CEO Jensen Huang saw the hidden potential. He understood that as AI research advanced, traditional CPUs would be unable to handle the scale of data and model training required. Over two decades, Nvidia steadily refined its hardware and software, creating an ecosystem (with CUDA as its backbone) that became indispensable for AI developers.
Today, Nvidia is one of the most valuable companies in the world — a result of vision, ecosystem building, and long-term execution.
Alphabet’s Quantum Ambition
Alphabet (NASDAQ: GOOG, GOOGL), parent of Google, may be positioning itself for a similar long-term play — but in quantum computing, a field that could eventually redefine how AI and complex problem-solving are done.
In December 2024, Alphabet unveiled its Willow quantum processor, featuring 105 qubits and advanced error-correction capabilities. On paper, this may seem like an incremental step forward. But in practice, Willow proved its superiority through a Random Circuit Sampling (RCS) experiment.
- Willow completed a set of computations in under five minutes.
- By contrast, the world’s most powerful supercomputers would take an estimated 10 septillion years to reach the same result.
Although commercial applications remain limited, this demonstration parallels Nvidia’s early GPU breakthroughs — an underlying proof that classical computing alone cannot match the scale and speed required for future workloads.
Building an Ecosystem, Not Just Chips
Like Nvidia, Alphabet is not relying solely on hardware. Instead, it is creating a self-reinforcing ecosystem that combines hardware, software, and research.
- TensorFlow: Alphabet’s widely adopted, open-source AI framework.
- Cirq: An open-source library that allows Python developers to design and test quantum algorithms.
- Google DeepMind: A cutting-edge research division exploring AI and quantum intersections.
This mirrors Nvidia’s CUDA strategy, where hardware was complemented with developer-friendly tools. CUDA ensured that once developers began building on Nvidia’s platform, demand for GPUs grew continuously, creating a technological moat. Alphabet seems to be betting on the same dynamic for quantum.
Why This Matters for the Future of AI
AI models are becoming exponentially larger and more computationally expensive. At some point, classical computing will hit a ceiling. That’s where Alphabet’s early investment in quantum computing comes in.
If successful, Alphabet could control the core platform on which future AI applications run — much like Nvidia dominates today’s AI infrastructure. This would not only provide hardware advantages but also strengthen its cloud, software, and research offerings.
Valuation: An Overlooked Opportunity
Despite its innovations, Alphabet trades at a valuation close to its three-year average forward price-to-earnings (P/E) multiple. Compared to peers like Microsoft, Amazon, and Nvidia, Alphabet’s multiple expansion has been modest, suggesting investors may not be fully pricing in the upside from its AI and quantum initiatives.
- Over the past three years, Alphabet has expanded AI across search, YouTube, e-commerce, and cybersecurity, in addition to pioneering hardware like Willow.
- Yet, much of this progress is not reflected in its stock price, leaving Alphabet relatively undervalued within big tech.
Investment Thesis
- Parallel to Nvidia: Just as Nvidia anticipated AI’s future needs decades ahead, Alphabet is positioning itself for the next leap — quantum-powered AI.
- Ecosystem Advantage: With TensorFlow, Cirq, and DeepMind, Alphabet is laying the groundwork for a closed-loop ecosystem that ensures developer adoption.
- Valuation Discount: Trading at relatively modest multiples, Alphabet may offer long-term investors exposure to the next frontier of computing at a bargain compared to peers.
Nvidia’s GPUs reshaped AI and made the company one of the most lucrative investments of the past two decades. Alphabet’s quantum advancements could play a similar role in the next computing revolution. While commercial quantum applications may be years away, Alphabet’s ecosystem strategy, early technological lead, and undervalued stock price suggest it could become the Nvidia of quantum computing.
For long-term investors seeking exposure to the next frontier in AI infrastructure, Alphabet stock looks like a compelling buy at current levels.
