Alphabet’s chip ambitions are suddenly looking less like an in-house project and more like the company’s next big money machine… and Wall Street is paying close attention.
Alphabet’s tensor processing units (TPUs) are becoming a major talking point for investors who see them as a serious future revenue engine.
The growing excitement has helped fuel a strong run for Alphabet’s shares in the final quarter of the year. The company’s TPUs have always held a prized position within Google, especially for accelerating cloud computing. But confidence is rising that Alphabet could one day sell the chips broadly, opening the door to a fresh business that analysts think could capture 20% of the global AI-chip market, a slice worth roughly $900 billion.
Gil Luria, head of technology research at DA Davidson, told Bloomberg that companies wanting alternatives to Nvidia may increasingly turn to Alphabet. He said, “If companies want to diversify away from Nvidia, TPUs are a good way to do it, and that means there’s a lot of reason to be optimistic.”
“The chip business could ultimately be worth more than Google Cloud,” he added.
Momentum fueled by big AI partnerships
Investor enthusiasm isn’t happening in a vacuum. Alphabet has been landing big deals, showing its chips are in high demand.
In late October, the company agreed to supply Anthropic with “tens of billions of dollars” worth of chips, a move that triggered a two-day stock rally of more than 6%, according to Bloomberg. Not long after, The Information reported that Meta was discussing a multibillion-dollar deal for access to TPU, sparking another jump in Alphabet’s share price.
Unlike Nvidia’s general-purpose chips, TPUs are application-specific integrated circuits (ASICs), designed solely to handle machine-learning tasks. Their specialization makes them less flexible, but cheaper, a notable advantage at a time when AI spending is under scrutiny.
Mark Iong, an equity portfolio manager at Homestead Advisers, explained this difference to Bloomberg. He said Nvidia’s chips are “much more costly and hard to get,” whereas Alphabet “leads that market by far.” He described TPUs as part of Alphabet’s “secret sauce” for performance and efficiency.
The launch of Alphabet’s Gemini AI model added more fuel. The new model earned strong reviews and is optimized to run on TPUs, giving investors another reason to view the chips as a growing competitive asset.
Iong also noted that Alphabet is the only tech firm with leading strength “in every layer of AI,” pointing to systems like Gemini, the cloud platform, and TPUs.
Analysts spot early signs of a TPU sales strategy
Morgan Stanley is among those who believe Alphabet may be laying the groundwork for wider chip sales.
In a recent note cited by Bloomberg, analyst Brian Nowak pointed to early signs of what he called a “budding TPU sales strategy.” He referenced estimates from the firm’s Asia semiconductor analyst projecting that about 5 million TPUs would be purchased in 2027 and 7 million in 2028, far higher than previous expectations.
Morgan Stanley believes that every 500,000 TPUs sold to third-party data centers could add around $13 billion to Alphabet’s 2027 revenue.
Balancing hype with caution
Despite the excitement, analysts warn that expectations are now high. Bloomberg reported that Alphabet’s stock trades at around 27 times projected earnings, though still below rivals Apple, Microsof,t and Broadcom.
Allen Bond, portfolio manager at Jensen Investment Management, said that while he recently took some profits from the stock’s surge, he remains bullish, citing “a credible path to the TPUs becoming a driver of revenue.”
He added that Alphabet is showing “tangible strength and progress with AI,” and despite rising enthusiasm, the valuation “still looks reasonable” given growth expectations.
In October, Alphabet delivered its first-ever $100 billion quarter, pulling in $102.3 billion in Q3 2025 on surging cloud and AI-powered growth — a concrete sign that the AI revolution is now turning serious money.