Alphabet is about to surpass Nvidia as the world's most valuable company. How did we get here?

• Alphabet is on the brink of overtaking Nvidia as the world's most valuable company.
• It's not that Nvidia has been doing poorly. It's that Alphabet has been on an epic, AI-fueled tear.
• Alphabet could keep outperforming as it continues to develop custom chips in-house.

Here's a good history lesson: No matter how dominant something may seem, there's always a challenger coming for the throne.

Just ask Yahoo, which probably thought it had web search on lock before being unceremoniously replaced by Google. Or maybe Blockbuster, which ignored upstart Netflix at its own peril, and was eventually wiped out entirely.

And there's always ExxonMobil, which was dethroned by Apple as the world's most valuable company in 2011, marking the stock market's shift towards mega-cap tech.

Today, you'd be forgiven for assuming Nvidia — which surged past Microsoft and Apple in recent years to become the most valuable company — has an iron-clad grasp on the top spot. The company is constantly inking partnerships to accelerate AI growth, and — most importantly — everyone desperately needs the chips it makes.

But Alphabet has emerged as a viable candidate to replace Nvidia as the market's top dog. Let's run down the reasons:

• The company won a landmark antitrust ruling in early September, removing a regulatory overhang and freeing it up to go all-in on AI. This was a key inflection point for the stock.
• Alphabet has proven able to translate AI investment into tangible impact, beating estimates for Google Cloud revenue in recent earnings.
• It's also made progress towards making its own chips.
• The company's Gemini chatbot is among the best in its class.
• Alphabet has a firm foundation of existing high-margin businesses, like Google Search and YouTube.
• Waymo gives it a presence in self-driving cars.

As of the Wednesday close, the company's market cap sat at $4.8 trillion, about $240 billion shy of Nvidia's. The chart below shows the speed at which the Alphabet has closed the gap.

Drilling down, a recent turning point was April 30. It was the first trading day after Alphabet reported blockbuster earnings that wowed analysts, especially in the AI-critical Google Cloud segment. Alphabet stock spiked 10%, driving the second-biggest daily market cap jump in history. The S&P 500 was up a healthy 1%.

Nvidia, meanwhile, fell 5% on the day. Not because of anything it did — it doesn't report earnings until May 20 — but because of what hyperscalers like Alphabet and Microsoft said about making their own chips. The reasoning is simple: these firms moving chips in-house could erode demand for stalwarts like Nvidia.

It was just one day, but it showcased why Alphabet and Nvidia's fates in the market have been diverging.

Nvidia is still largely a pure AI infrastructure bet, making it more vulnerable to shifts in AI spending. Alphabet, meanwhile, is proving it can turn AI into actual business results. It's improving ads, search, and cloud growth, while also building out its own infrastructure. And it's reducing reliance on Nvidia with custom chips.

It remains to be seen how tightly investors cling to this narrative in the longer term. But for now, Alphabet's ascent to number one looks inevitable.