What are Alphabet's Tensor Processing Units (TPUs)?

TPUs are custom-designed AI accelerators developed by Google to enhance machine learning tasks and AI model training.

How will increased TPU production impact Alphabet's revenue?

Morgan Stanley predicts that improved TPU availability and sales could generate billions in new revenue for Alphabet.

When is the projected ramp-up for Google's AI chip production?

Projections indicate that TPU production could reach approximately 7 million units by 2028, with significant increases expected in the coming years.

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Google's AI Chip Surge: Billions in New Revenue Ahead

2 Dec

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Summary

Morgan Stanley predicts improved TPU availability for Google.
TPU production could reach 7 million units by 2028.
Half a million additional TPUs could yield $13 billion revenue.

Google's AI Chip Surge: Billions in New Revenue Ahead

Morgan Stanley's semiconductor team indicates that Alphabet's Tensor Processing Units (TPUs) are seeing improved availability, paving the way for accelerated commercial strategies. Projections now suggest production could reach 7 million units by 2028, a substantial increase from previous estimates. This enhanced manufacturing scale points to broader commercial ambitions beyond internal use.

The firm estimates that selling an additional 500,000 TPUs could unlock approximately $13 billion in revenue and boost Alphabet's earnings per share. This revenue stream is partly driven by opportunities to sell these high-performance chips directly to third-party data center operators.

While a significant portion of the increased production will support Google's own AI workloads and cloud demand, the overall ramp-up signals a strong enterprise demand for compute power to train and deploy AI models. This positive outlook also influenced Morgan Stanley's upgrade of MediaTek due to broader AI ASIC supply chain strength.