$GOOG vs $NVDA The “Two Kingdoms” of AI Infrastructure
EXECUTIVE BRIEFING: To: Global Markets Navigator Subscribers (Full Report to Paid Subscribers)
From: Bill Cara
Report Date: November 25, 2025
Subject: Capital Allocation Strategy for the Google vs. Nvidia Split
1. The Core Thesis: A Bifurcated Market
The AI compute market is no longer a monolith. It has split into two distinct ecosystems (”Kingdoms”), each with its own supply chain, economic model, and investment vehicle.
Kingdom A: The Nvidia Ecosystem (Blackwell). The “Merchant Arms Dealer.” Nvidia maximizes universal compatibility and per-chip performance. They sell to everyone (Meta, Microsoft, Amazon, Tesla). Their primary advantage is software (CUDA) and deployment flexibility.
Kingdom B: The Google Ecosystem (Ironwood/TPUv7). The “Walled Garden.” Google maximizes cluster efficiency and cost-per-token. They sell to no one. Their primary advantage is the ability to connect >9,000 chips into a single “super-brain” (pod) using optical switches, bypassing standard networking bottlenecks.
Investment Implication: You cannot “buy” the Google chip. You can only buy the partners that build it. Conversely, Nvidia is the investable asset for its own kingdom.
2. Valuation & “Cheat Sheet” (As of Nov 25, 2025)
We have isolated the “Double Dippers”—companies that win regardless of which kingdom dominates—and compared them against the pure-play architects.
Note on Fiscal Years: Nvidia’s “Forward P/E” is based on its Fiscal Year ending Jan 2026. Broadcom’s is based on Fiscal Year ending Oct 2026.
3. Supply Chain “Battleground” Map
The Nvidia “Blackwell” Supply Chain (Public Standards)
Philosophy: Brute force performance. Hotter chips, more copper, standard networking.
Key Winners:
Copper Cabling: Amphenol (APH) is the big winner here. Blackwell racks use over 2 miles of copper per rack, bypassing optics for short distances.
Server Assembly: Foxconn (2317.TW) and Quanta (2382.TW). These “AI Factories” are building the actual racks for Microsoft and Meta.
Cooling: Vertiv (VRT) provides the Coolant Distribution Units (CDUs) required to keep these 120kW racks from melting.
The Google “Ironwood” Supply Chain (Proprietary)
Philosophy: Efficiency at scale. Optical interconnects, custom silicon, liquid cooling.
Key Winners:
Silicon Partner: Broadcom (AVGO) designs the physical layout of the TPUv7.
Optical Switching: Lumentum (LITE) and Coherent (COHR). Google uses light (optics) to switch data between chips, unlike Nvidia’s heavy use of electrical/copper switching.
Assembly: Celestica (CLS). The primary partner for integrating Google’s proprietary racks.
4. Dividend & Income Safety
For the long-term portion of the portfolio, we prioritize Dividend Growth over current yield.
Safest Income: TSMC (TSM). Pays a reliable ~1.2% yield with a low (34%) payout ratio. It is the “utility stock” of the 21st century.
Best Growth: Amphenol (APH). Recently hiked its dividend by ~50%. With a payout ratio of only ~21%, they have decades of double-digit dividend growth ahead.
Income Trap: Nvidia (NVDA). Do not hold for income (0.02% yield). It is purely a capital appreciation vehicle.
5. Final Recommendation
Allocate capital based on your belief in “Open” vs. “Closed” systems:
Neutral / Defensive: Overweight TSMC and SK Hynix.
Pro-Nvidia (Merchant): Overweight Amphenol (Copper play) and Nvidia.
Pro-Google (Walled Garden): Overweight Broadcom and Celestica.