Alphabet Inc (NASDAQ:GOOG), Google’s parent company, may be sitting on an almost $1 trillion opportunity with its AI chips, according to Gil Luria, head of technology research at DA Davidson.
Luria estimates that if Alphabet expands external sales of its tensor processing units (TPUs), the business could capture roughly 20% of the AI market, valuing it at about $900 billion.
TPUs, designed to power Google Cloud, are specialized for AI workloads. While less versatile than Nvidia’s chips, they are more cost-effective, appealing to companies seeking alternatives in the AI market.
Alphabet recently agreed to supply one million chips to AI startup Anthropic, reflecting rising external demand.
The potential of the chip business has helped fuel Alphabet shares, which rose 31% during the fourth quarter, making it one of the S&P 500’s top performers. The stock traded hands at $317 on Thursday afternoon, which marks year-to-date growth of 66%.
“If companies want to diversify away from Nvidia, TPUs are a good way to do it,” Luria said. “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 more efficient cloud.”