Alphabet's AI chips are a potential $900 billion secret sauce'

"The success of Alphabet's tensor processing unit, or TPU, chips is a primary reason for the stock's 30% fourth-quarter rally, putting it among the best performers in the S&P 500 Index. The TPUs were always seen as a major strength internally, accelerating growth for the company's cloud-computing business. But there's rising optimism that Alphabet could start selling the chips to third parties, creating a new revenue stream in a business that could ultimately be worth almost a trillion dollars."

"The chip business could ultimately be worth more than Google Cloud. But even if it never sells a chip externally, the better chip means a better, more efficient cloud. Should Alphabet get serious about selling its TPUs, Luria estimates they could capture 20% of the artificial intelligence market over a few years, which would make it a roughly $900 billion business."

"In late October, Alphabet announced that it will supply tens of billions of dollars of chips to Anthropic PBC, which sent the stock on two-day rally of more than 6%. Then a month later, the Information reported that Meta Platforms Inc. is in talks to spend billions for access to TPUs, sparking another leap. TPUs are application-specific integrated circuit, or ASIC, chips"

Alphabet's tensor processing units (TPUs) have driven a 30% fourth-quarter stock rally and positioned the company among top S&P 500 performers. TPUs accelerate Google Cloud performance and have long been a core internal strength. Rising optimism centers on selling TPUs to third parties, which could create a substantial new revenue stream. Analyst estimates suggest TPUs could capture about 20% of the AI market over a few years, implying roughly a $900 billion opportunity. Alphabet committed tens of billions of dollars of chips to Anthropic and is reportedly in talks with Meta for TPU access. TPUs are application-specific integrated circuit (ASIC) chips.

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