<div id="readability-page-1">Artificial intelligence (AI) has been a hot topic for more than two years now. A small group of tech giants has emerged as leaders in this space, providing either the computing hardware or the user-friendly services that power this technology revolution. You know them as the &#34;Magnificent Seven&#34; stocks. This phrase suggests greatness, though it was always meant as a warning signal. Several of the seven heroes died in the 1960 movie by the same name. The seven original AI leaders could stumble and fall, too. As I'm writing this on May 28, the Magnificent Seven stocks have separated into two distinct groups. High-performance microchip designer Nvidia (NVDA -2.10%) stole the show so far with a total gain of 701% in the ChatGPT-inspired generative AI boom. Software and services giant Alphabet (GOOG -0.89%) (GOOGL -0.87%) has a more modest stock return of 72% over the same period. There are so many questions in the air. Can Nvidia hold on to its dominant grip on the AI hardware opportunity? Will Alphabet's Google division thrive in the new age of AI-driven online services? Are the stocks trading at reasonable valuations these days? And most of all -- which one of these mighty AI stocks is the better buy today? Let's take a look. <h2>Is Nvidia too expensive?</h2> At first glance, Nvidia's stock looks too hot to handle. The stock price has multiplied by 8 in about 30 months. Nvidia's business may be booming, but those shares are changing hands at the lofty valuation of 25 times sales and 54 times free cash flows. Many investors will look no further, walking away from these deal-breaking valuation multiples. At the same time, lots of investors absolutely love Nvidia's stock at these prices. It comes with one of the lowest short-seller interests on the market. An overwhelming majority of analysts tracking this stock call it a &#34;buy&#34; and the average one-year price target is about 24% above the current value. And the Nvidia bulls have their reasons. The company's sales more than doubled in 2023, doubled again in 2024, and are poised to continue soaring as the generative AI market evolves. Furthermore, Nvidia can charge very high prices for its AI accelerator chips and be more limited by manufacturing capacity than by customer demand. As such, Nvidia's profits have skyrocketed much faster than the plain top-line sales. So if you expect Nvidia to stay on its AI hardware throne throughout the mega-growth portion of this generative AI revolution, the stock could definitely be a good buy today. It's not every investor's favorite cup of wealth-building tea, but Nvidia's stock appeals to a certain type of growth-oriented stock buyer. <h2>Is Alphabet undervalued?</h2> Here's a fun fact. Alphabet makes more money than Nvidia, even after the chip guru's massive growth spurt. The Google parent's annual revenues are about three times the size of Nvidia's. The difference grows smaller when you look at different types of profit, but Alphabet is still consistently larger: <img src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/0b8a02aeead07fee93b210edb2b45120.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1015" height="720" original-src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/0b8a02aeead07fee93b210edb2b45120.png"/> GOOGL Revenue (TTM) data by YCharts Now, Alphabet's huge financial figures are paired with significantly slower growth rates. Hence, the stock doesn't come with growth-inspired price premiums. Trading at 5.9 times sales and 28 times free cash flows, Alphabet's ratios are in the same ballpark as the average S&amp;P 500 (^GSPC -0.24%) component. That makes Alphabet a value-oriented bet on the generative AI boom. It's also a solid long-term holding, with or without the AI-focused opportunity. This company was built to thrive in pretty much any economy. The Google-based Alphabet you see today could look very different 10 or 20 years from now, but it should still be an innovative winner. <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MTk4MzMvcm9ib3QtaW4tZGVlcC10aG91Z2h0LWZsaXBwZWQuanBnJnc9NzAw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="437" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MTk4MzMvcm9ib3QtaW4tZGVlcC10aG91Z2h0LWZsaXBwZWQuanBnJnc9NzAw"/>Image source: Getty Images. </div> <h2>Final thoughts: Which AI stock would I buy today?</h2> I don't want to throw Nvidia under Wall Street's heaviest bus. The company just might be able to stave off AI chip rivals for years to come, until the ballooning valuation finally makes sense. I'm certainly not closing out my own Nvidia position today, hoping to catch a bit more of its AI-driven gains. But I'm not buying more Nvidia stock today, either. Alphabet is a much more tempting idea, pairing the company's ultimate longevity with a very reasonable share price. It's one of my favorite investments of all time, and a particularly strong buy at today's modest valuation. </div>

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The article compares two leading AI stocks: Nvidia and Alphabet. Nvidia has seen a remarkable 701% gain during the AI boom, but its stock is considered overvalued at 25 times sales. Conversely, Alphabet, with a more modest 72% gain, is viewed as undervalued at 5.9 times sales. While Nvidia's growth is impressive, Alphabet's consistent revenue and reasonable valuation make it a more attractive long-term investment. The author suggests holding Nvidia but favors Alphabet as a stronger buy at its current price.

- The article discusses the performance and valuation of two leading AI stocks, Nvidia and Alphabet, amidst the generative AI boom.  
- Nvidia has seen a significant stock increase of 701%, but its high valuation raises concerns, while Alphabet, with a more modest growth of 72%, is viewed as undervalued despite higher revenues.  
- The author suggests that while Nvidia may continue to thrive, Alphabet presents a more attractive investment opportunity due to its reasonable share price and long-term potential.

Better AI Stock: Alphabet vs. Nvidia