Alphabet Inc. is closing in on Nvidia Corp. in the race for tech-market dominance as strong demand for its new Gemini AI models and growing interest in its in-house AI chips lift the company’s shares. The Google parent rose 2% on Wednesday, bringing its market value to roughly $3.9 trillion, just $300 billion shy of Nvidia’s $4.2 trillion valuation.

The rally adds to a stunning run that has seen Alphabet gain about 37% since mid-October, adding nearly $1 trillion in market value over that period. Investors are increasingly betting that Alphabet’s advances in both AI software and hardware could reshape the competitive landscape.

A major catalyst came from a report that Meta Platforms Inc. is in discussions to start using Google’s tensor processing units – or TPUs – in its data centers beginning in 2027. Meta may also rent TPU capacity through Google Cloud next year. Such a partnership would give Alphabet’s chips a high-profile customer and challenge Nvidia’s position as the dominant supplier of AI accelerators.

The prospect of real competition sent Nvidia shares down 5.1%, with rival chipmaker AMD falling 7.8%. Nvidia’s valuation has cooled to 26 times forward earnings, well below its long-term average. Alphabet, boosted by the excitement surrounding Gemini, now trades at 27 times forward earnings, up sharply from past levels.

Analysts say the developments highlight a shift in market sentiment. Alexandra Morris, investment director at Skagen AS, said the belief that Nvidia alone would supply chips for the global buildout of AI data centers “has changed,” though she added that TPUs still need to prove they can match Nvidia’s efficiency and compute performance at scale.

The surge in Alphabet shares has pushed its relative strength index to about 75, a level many technical analysts consider overbought. Matthew Maley of Miller Tabak noted that Alphabet could assume a “leadership role” in the AI industry but may also be due for a near-term pullback.

Even so, the momentum reflects growing expectations that Alphabet may play a much larger role in the AI hardware market than previously assumed – potentially setting up a reshaping of the global tech leadership rankings.