Google $GOOGL ( ▲ 0.72% ) may be sitting on one of the most valuable untapped businesses in Big Tech. Its custom TPU chips, once seen mainly as an internal advantage for Google Cloud, are now being talked about as a potential revenue stream that could reshape the company’s long-term growth. Analysts told Bloomberg that if Alphabet eventually sells TPUs to outside customers, it could realistically capture about one-fifth of the AI chip market, creating a business worth as much as nine hundred billion dollars.
Even without selling chips directly, Google benefits every time it pushes TPU performance forward. The newest generation delivered a huge leap in power efficiency, which lowers costs and boosts margins inside Google Cloud. That alone has helped fuel a strong run for Google this quarter, as investors gain confidence that Alphabet’s hardware stack gives it a meaningful advantage.
Wall Street’s enthusiasm has been reinforced by several recent wins. Alphabet agreed to supply tens of billions of dollars’ worth of TPUs to Anthropic, and Meta has reportedly explored buying access as well. The launch of Gemini, which is optimized to run on TPUs, only strengthened the argument that Alphabet controls more layers of the AI stack than any of its competitors.
TPUs are ASIC chips built for machine learning tasks, making them cheaper and more efficient than general-purpose GPUs even if they are less flexible. That value proposition is becoming increasingly attractive as companies look for alternatives to Nvidia $NVDA ( ▲ 3.74% ) and try to rein in AI spending. Analysts say every five hundred thousand TPUs sold to third-party data centers would materially lift Alphabet’s revenue and earnings.
There is still no official signal from Alphabet on whether it plans to fully commercialize TPU sales. But Morgan Stanley sees early signs of a developing strategy as chip demand projections for 2027 and 2028 continue to rise. The risk, of course, is that expectations for Google’s chip business start to outpace reality, especially with the stock’s valuation drifting toward multi-year highs. Still, many investors argue that Alphabet remains attractively priced compared to peers like Apple and Microsoft, especially with such a large AI opportunity forming inside the company.
If TPUs become a product, not just an internal tool, Alphabet could have a revenue engine bigger than Google Cloud itself and investors are beginning to price in that possibility.