Investors are becoming more optimistic that tech giant Alphabet’s (GOOGL) in-house AI chips, called tensor processing units (TPUs), could become a big source of future revenue. These chips, which help power Google Cloud, are seen as one reason why Alphabet’s stock has jumped about 30% in the fourth quarter. TPUs have long been an internal strength for the company, but now there’s growing hope that Alphabet could start selling them to other companies.
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If that happens, five-star analyst Gil Luria believes that the chip business could capture about 20% of the AI market and, on its own, could one day be worth $900 billion. Reports have added to this optimism. In October, Alphabet said it would supply billions of dollars’ worth of chips to AI startup Anthropic (PC:ANTPQ). A month later, The Information reported that Meta Platforms may spend billions for TPU access. Unlike Nvidia’s (NVDA) general-purpose chips, Alphabet’s TPUs are designed specifically for machine learning, which makes them cheaper and more efficient.
In addition, analysts like Mark Iong argue that even if Alphabet never sells them widely, having stronger chips will improve its cloud services and give it an edge in the AI race. Still, it’s unclear how aggressively Alphabet will pursue outside sales of TPUs. Interestingly, though, five-star Morgan Stanley analyst Brian Nowak previously estimated that selling 500,000 chips to third-party data centers could add $13 billion to Alphabet’s 2027 revenue and $0.37 to earnings per share.
Is Google Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on Google stock based on 30 Buys and seven Holds assigned in the past three months. Furthermore, the average Google price target of $316.03 per share implies that shares are trading near fair value.
