Alphabet’s AI Chips Are a Potential $900 Billion ‘Secret Sauce’

Core Viewpoint - Investors are increasingly optimistic about Alphabet Inc.'s semiconductor business, particularly its tensor processing unit (TPU) chips, which could significantly boost future revenue for Google's parent company [1][2]. Group 1: Financial Performance - Alphabet's TPU chips contributed to a 30% rally in stock price during the fourth quarter, making it one of the best performers in the S&P 500 Index [2]. - The announcement of a deal to supply tens of billions of dollars of chips to Anthropic PBC led to a two-day stock rally of over 6% [5]. Group 2: Market Potential - There is optimism that Alphabet could begin selling TPUs to third parties, potentially creating a new revenue stream that could be valued at nearly $1 trillion [2][4]. - If Alphabet captures 20% of the artificial intelligence market through its TPUs, this could represent a business worth approximately $900 billion [4]. Group 3: Competitive Landscape - TPUs are seen as a viable alternative for companies looking to diversify away from Nvidia, which could enhance Alphabet's market position [4][7]. - While TPUs are less flexible than Nvidia's semiconductors, they are cheaper and specifically designed for machine learning workloads, making them attractive in the current market [6].