Shares of Alphabet (GOOGL) jumped 2.6% in after-hours trading yesterday, while Nvidia (NVDA) and Advanced Micro Devices (AMD) fell 1.5% and 1.7%, respectively. The move follows a report by The Information that Alphabet is promoting its custom tensor processing units (TPUs) to Meta Platforms (META) and major financial institutions. The tech giant is taking on Nvidia in a big way by pitching the deployment of its in-house chips for large-scale artificial intelligence (AI) workloads.
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Until now, Google has used these TPUs only in its own cloud data centers and rented the infrastructure to others. The company is now shifting its strategy, selling the TPUs directly to third parties, citing enhanced security and compliance needs.
Google-Meta Discuss Multibillion Dollar TPU Deal
Facebook and Instagram parent Meta, is reportedly in talks to spend billions to add Google’s TPUs to its data centers starting in 2027. It may also begin renting TPU capacity from Google Cloud next year. Currently, Meta relies heavily on Nvidia GPUs for its AI systems.
If the deal with Meta happens, it would be a major boost for Google’s chip business. Google has been telling potential clients that using TPUs on-site can help them handle strict data security and compliance rules. Google already has a deal to sell up to 1 million TPUs to AI startup Anthropic PBC (PC:ANTPQ).
Google Cloud executives project capturing up to 10% of Nvidia’s annual revenue by expanding its TPU adoption, suggesting a high-stakes opportunity for Google. The company’s strategy to deploy its TPUs directly in customer data centers represents a bold step in the AI chip competition, especially as demand for AI compute surges and Nvidia maintains a dominant position in the supply chain.
Alphabet’s AI Chip Strategy
Google shares are rallying towards a $4 trillion market capitalization, rivaling Nvidia and surpassing Microsoft (MSFT). Google’s TPUs are reportedly cheaper than Nvidia’s chips and were used for training its most-advanced generative AI model, Gemini 3, which has received highly positive reviews.
The tensor chip, originally made over a decade ago for AI tasks, is now being adopted more widely as an alternative to Nvidia hardware, especially as many firms seek to reduce reliance on it. Meanwhile, Advanced Micro Devices remains a distant competitor in this market.
Meta is considered one of the largest global spenders on AI and data centers. A deal with Meta would mark a big win for Google if Meta starts using Google’s tensor chips in its data centers. However, the success of the deal depends on whether the TPUs can deliver enough power efficiency and computing strength to be a long-term option for Meta’s AI needs.
Is GOOGL Stock a Good Buy?
Analysts remain highly optimistic about Alphabet’s long-term outlook. On TipRanks, GOOGL stock has a Strong Buy consensus rating based on 31 Buys and seven Hold ratings. The average Alphabet price target of $312 implies 2.1% downside potential from current levels. Year-to-date, GOOGL stock has surged nearly 69%.
