Alphabet, Google's parent company, has recently attracted significant market attention with its AI chip, the TPU. Originally intended for use primarily in Google Cloud, this accelerator chip is now seen by Wall Street as potentially generating nearly $900 billion in new business opportunities and is expected to capture 20% of the AI market share in the coming years. From its massive order with Anthropic to reports that Meta is also in talks to adopt it, Alphabet's AI strategy is considered one of the core reasons for the company's 30% stock price surge in the fourth quarter.
The stock price surged, with TPU as the driving force behind it.
According to reports , Alphabet's stock price surged by approximately 30% in the fourth quarter, becoming one of the brightest performing tech stocks in the S&P 500. The market widely believes that the core reason is the strong performance of Google's own AI chip, the TPU.
TPUs have long been considered the foundation of Google Cloud's competitiveness, and now the market is betting that Alphabet will officially sell TPUs to the public in the future, opening up a brand new revenue stream for the company.
Businesses are seeking alternatives to Nvidia, leading to a rapid increase in TPU demand.
Gil Luria, head of technology research at DA Davidson, a US financial services company, pointed out that many companies are looking to reduce their reliance on NVIDIA, and TPUs are one of the most viable alternatives available at present.
He predicts that if Alphabet actually invests in chip sales, TPUs could capture 20% of the AI market share in the next few years, corresponding to a potential business opportunity of approximately $900 billion. Luria also added that even without selling chips, TPUs can improve the efficiency and cost advantages of Google Cloud.
In response to external expectations for a more diversified chip supply, Nvidia quoted CEO Jensen Huang as saying that the real competition lies in the strength of the team, and there are actually very few companies capable of creating such complex chips. This may be a reminder to the market that Nvidia's leadership is not solely based on its products, but rather on its entire team and technological foundation, which is difficult to catch up with quickly.
Anthropic's talks with Meta to purchase TPUs have further boosted Alphabet's stock price.
In late October, Alphabet announced it would supply Anthropic with AI chips worth "hundreds of billions of dollars," causing the company's stock price to surge by more than 6% in two days. Subsequent reports indicated that Meta was also in talks to invest "billions of dollars" in TPUs, further boosting Alphabet's stock price.
TPUs are ASIC chips. Although their applications are relatively limited, their cost is lower than that of GPUs, which perfectly meets the needs of enterprises to reduce costs and increase efficiency in AI investment.
Gemini-enhanced TPU drives market expectations upward across the board.
Alphabet's latest AI model, Gemini 3 Pro, has received excellent reviews since its launch, and its computing architecture is optimized for TPUs, making the market more optimistic about the long-term competitiveness of TPUs.
While there are expectations that Alphabet will be more aggressive in selling TPUs, the company itself has not yet made a clear statement. However, Morgan Stanley analyst Brian Nowak believes that Alphabet may have decided to launch a TPU sales strategy.
Their Asian semiconductor team estimates that TPU demand will be significantly revised upward to 5 million units in 2027 and 7 million units in 2028, representing increases of 67% and 120% respectively.
With substantial revenue contributions, the valuation remains relatively attractive.
Morgan Stanley estimates that if Alphabet sells 500,000 TPUs to external data centers, it could generate approximately $13 billion in revenue and contribute $0.40 per share in earnings.
The market estimates Alphabet's revenue at approximately $447 billion in 2027, with the additional $13 billion representing nearly 3% growth. In the past three months, the market has revised its 2027 revenue forecast upwards by more than 6%.
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