Key Points
- Investor excitement over Alphabet’s custom AI chips, known as TPUs, is driving its stock price higher.
- The big opportunity is Google’s potential to sell these chips to other companies, creating a massive new business.
- TPUs are seen as a cheaper, more efficient alternative to Nvidia’s expensive AI chips.
- Major companies like Anthropic are already buying the chips, and Meta is reportedly interested as well.
Investors are growing incredibly excited about a key piece of Google’s technology that usually stays behind the scenes: its custom-built artificial intelligence chips. This optimism has helped fuel a massive 31% rally in Alphabet’s stock this quarter, as Wall Street begins to see the company’s semiconductors as a major future moneymaker.
The buzz surrounds Google’s “tensor processing units,” or TPUs. For years, Google used these chips internally to power its own AI and cloud services.
Now, there’s growing belief that Alphabet could start selling these powerful chips directly to other companies. This move would create a brand-new revenue stream that some analysts think could eventually be worth almost a trillion dollars.
The appeal is clear. TPUs are designed specifically for AI tasks, making them a cheaper and more efficient alternative to the powerful but very expensive chips sold by the market leader, Nvidia. At a time when many companies are worried about the high cost of AI, a more affordable option is a huge advantage.
This isn’t just talk. Alphabet recently struck a deal to supply billions of dollars’ worth of TPUs to the AI firm Anthropic. Reports also suggest that Meta is in talks to buy access to the chips. One analyst estimates that if Google gets serious about selling TPUs, it could capture 20% of the AI chip market, creating a business worth around $900 billion.
Even a small number of sales could add billions to Alphabet’s bottom line. While the stock is more expensive now, many investors believe its chip business’s potential makes it a compelling bet.
