For a long time I have used NVDA as an example of how to pick the obvious winner in a major theme. More and more, cracks are starting to form in the obvious part of that equation as competition and doubts start to emerge. Today we talk about some competition…..

The market finally got the thing it’s been half‑expecting and half‑dismissing: a credible, production‑scale alternative to Nvidia inside a real AI product. Google’s Gemini 3 isn’t just another “whizzy chatbot.” It’s a flagship model that third‑party benchmarks say outperforms OpenAI’s latest on key reasoning tasks and was trained end‑to‑end on Google’s own TPUs, not Nvidia GPUs.

That’s the part that matters. Alphabet has gone from “maybe they missed AI” to “best‑performing Mag7 name,” up ~68% this year and pushing toward a $4 trillion market cap, with Broadcom, Celestica, and Lumentum screaming higher as the TPU supply chain gets repriced.

Nvidia, meanwhile, is still near peak revenue and earnings, but the narrative has cracked: its stock is down almost 10% this month and we just watched another “DeepSeek moment” where investors realized cheaper, more efficient AI is possible on non‑Nvidia hardware.

Under the hood, this isn’t just Google vs. Nvidia; it’s hyperscalers vs. merchant silicon. Google, Meta, OpenAI and others are racing to design their own accelerators and using Broadcom and similar partners to turn those designs into custom ASICs at scale.

Google’s Ironwood TPU is now on its seventh generation, optimized for high‑volume inference at lower cost and power than general‑purpose GPUs.

Meta is reportedly kicking the tires on buying billions of dollars’ worth of Google TPUs for its own data centers, a direct shot across Nvidia’s bow and even AMD’s, which has been courting Meta with its own GPUs.

If that deal happens, we’re no longer talking about “Google’s in‑house chip for Google workloads.” We’re talking about a second AI hardware platform, sold to third parties, with price/performance that can undercut GPU‑only clouds. That’s why Nvidia and AMD sold off on the headlines and why Oracle—sitting on billions of dollars of Nvidia GPUs it rents out—is suddenly in the crosshairs of every TPU slide deck.

In pure market‑cap terms, it’s already getting tight. After this latest move, the gap between Nvidia and Alphabet has shrunk to roughly half a trillion dollars, the smallest in months.

At current sizes, that’s basically one bad month for Nvidia and one good month for Google. If you force me to handicap it: I’d say there’s a better‑than‑even chance we see Google briefly trade above Nvidia in market cap sometime in the next 12–24 months, not because Nvidia “dies,” but because investors re‑rate the idea that one company gets all of the AI economics.

Where I’m much more conservative is on infrastructure dominance. Nvidia still owns the training stack at scale—CUDA, cuDNN, libraries, developer mindshare, and a roadmap of H‑class GPUs that everyone from hyperscalers to Chinese tech giants is still lining up to buy.

Google’s TPUs, and custom ASICs more broadly, are a much bigger threat to inference economics and pricing power than to Nvidia’s near‑term training volumes. The more Google proves you can run frontier‑class models on cheaper silicon, the more the whole ecosystem shifts from “pay whatever Nvidia asks” to “optimize relentlessly for cost per token.” That doesn’t kill Nvidia, but it does cap how crazy the margin story can get.

Likely Winners

Likely Losers (or at least “less obvious winners”)

Not investment advice, but if I’m building an AI infrastructure basket for this new phase, my core has:

Then around that core, I’d consider higher‑beta satellites sized appropriately:

The big picture: Google just proved that Nvidia isn’t the only way to do state‑of‑the‑art AI at scale. That’s bad for Nvidia’s myth, but not necessarily bad for Nvidia’s business if the opportunity stays as big as it looks. The real trade from here is less “pick one winner” and more “own the platforms and the plumbing that get paid no matter which logo is on the chip.”

In today’s News vs. Noise, let’s talk about the market’s new favorite fantasy: a third “insurance” cut in December. I’m not sure how much a December cut matters in the long run as a pause in December makes a cut in January almost certain. However, a lot of last week’s weakness was probably a re rating of the odds of December, so any Fed pivot is probably a good sign for those who want a Santa Claus rally.

It is simultaneously shocking and completely on‑brand that excitement has exploded again. The 12‑member FOMC is genuinely split. Miran, Waller, Williams, Jefferson (and likely Bowman) are openly comfortable taking rates lower, while Musalem, Schmid, Goolsbee, Collins, Barr – and, based on his recent comments, Powell himself – are leaning toward a hold. Governor Cook is stuck in the middle. Add in the new political buzzword of the month (“affordability crisis”) and you can see why the Fed is starting to look more like Congress than an independent technocratic body.

What makes this debate absurd is the macro backdrop. The Fed has already delivered two 25 bp “insurance” cuts into what’s likely to be a ~4% Q3 GDP print, with unemployment at 4.4% (still lower than ~¾ of all readings in the last 77 years) and core CPI running around 3% – a level we haven’t seen near target since 2021. On top of that, there are growing signs of froth and speculative behavior in private credit. Any Q4 weakness will be largely self‑inflicted via a government shutdown and policy whiplash. Against that, Powell’s allies (Williams, Daly) are now publicly laying the groundwork for a December move, arguing that a weakening labor market is the bigger risk and hinting at a “cut now, then hold” strategy. The fact that we’re even debating a third cut, with incomplete data and a still‑elevated inflation backdrop, is the real story: it shows how far the Fed has drifted toward accepting 3% inflation as the new normal.

Today stock is Power Integrations (POWI)…..

POWI is an AI picks and shovels play with a reasonable base case valuation. Look for a potential undercut and rally at the 10 day moving average.

The H.E.A.T. (Hedge, Edge, Asymmetry and Theme) Formula is designed to empower investors to spot opportunities, think independently, make smarter (often contrarian) moves, and build real wealth.

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