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These companies have more diversified businesses than the computer chip giant.
First up is Amazon. The technology giant is one of Nvidia's largest customers, spending a boatload of money each year on AI-related computer chips for its cloud infrastructure business, Amazon Web Services (AWS). While Amazon will still remain an Nvidia customer, it has begun diversifying its chip procurement by developing in-house brands. Specifically, AWS is working closely with the fast-growing AI start-up Anthropic to build data centers using these in-house chips, slowly pushing Nvidia out as its preferred chip provider. This will save Amazon money while also potentially producing a headwind for Nvidia over the next few years. When looking at Amazon's business, it is doing just fine at the moment. Revenue from North American commerce grew 10% year over year last quarter to $127 billion, while AWS revenue was up 24% year over year to $35.6 billion. This year, Amazon plans to spend $200 billion on capital expenditures, primarily on AWS. This should lead to stronger growth for its AI cloud computing business as start-ups like Anthropic -- along with its existing corporate clients -- keep pouring billions of dollars into the AI race.
The other major customer-turned-competitor to Nvidia is Alphabet, parent company of Google, YouTube, and Gemini. Alphabet was one of the first big tech companies to invest in its own computer chips, with the in-house Tensor Processing Units (TPUs) now powering a bunch of the business's internal data center usage and cloud infrastructure. Like Amazon, Alphabet will remain a customer of Nvidia but could reduce its exposure to the third-party chipmaker over time. Alphabet also has plenty of ways to benefit from the AI revolution, while Nvidia is focused solely on selling computer chips to data centers for close to 100% of its revenue. Alphabet's Google Search revenue rose 17%, and Google Cloud revenue rose 48%, both benefiting from the growing use of AI worldwide. Use of its advanced AI chatbot Gemini is growing quickly as well. To top it all off, Alphabet and Amazon trade at P/E ratios below 30. Nvidia's is 46. These two stocks are much better AI bets for investors over the next few years, even if Nvidia crushed them over the last three.