Google's decade-long bet on custom chips is turning into company's secret weapon in AI race

Core Insights - Nvidia is the leading provider of artificial intelligence chips, achieving a market cap of $4.5 trillion, with Google as a significant client purchasing GPUs to meet AI compute demands [1][2] - Google is not only a buyer but also a developer of AI chips, recently announcing its most powerful chip, Ironwood, which is designed for heavy AI workloads and is over four times faster than its predecessor [2][3] - Google’s TPUs provide a competitive edge in the cloud market, with a notable increase in cloud revenue by 34% year-over-year to $15.15 billion, driven by strong demand for AI infrastructure [8][9] Company Developments - Google has developed its seventh generation of Tensor Processing Units (TPUs), which are application-specific integrated circuits crucial for AI tasks [3][4] - The company has been proactive in securing large contracts, including a significant deal with Anthropic valued in the tens of billions, expected to bring over a gigawatt of AI compute capacity online by 2026 [12][13] - Google’s cloud segment is experiencing substantial growth, with a backlog of $155 billion and a forecasted increase in capital expenditures to $93 billion for the year [8][21] Competitive Landscape - Google is ahead of competitors like Amazon and Microsoft in deploying custom AI chips at scale, with analysts noting that Google is the only major player to have deployed TPUs in large volumes [5][4] - While Nvidia remains a dominant player in AI chips, analysts suggest that growing familiarity with Google’s TPUs could drive further growth in Google Cloud [22][23] - The demand for TPUs is so high that analysts recommend Google consider selling these systems externally to customers, indicating a closing gap between TPUs and Nvidia’s offerings [23]