The Next Phase of the Artificial Intelligence Race Could Benefit This Company Most

Core Insights - The next phase of artificial intelligence (AI) will be defined by diversification in AI hardware and increased incorporation of AI software that integrates well with existing technology tools [1][2] Group 1: AI Hardware - Alphabet has developed its own artificial intelligence processors, known as Tensor Processing Units (TPUs), which have been used internally for training AI [3] - A report indicates that Meta Platforms may be interested in purchasing Alphabet's processors, potentially leading to a deal worth billions of dollars [4] - Analysts at Morgan Stanley estimate that if Alphabet begins selling its TPUs, it could sell between 500,000 to 1 million units by 2027, with cloud sales rising by 11% and earnings per share increasing by 3% for every half million processors sold [6] Group 2: AI Software - The AI market is evolving towards software-centric tools, with AI agents becoming a key focus area [7] - Alphabet's chatbot, Gemini 3, is positioned as a strong competitor to OpenAI's ChatGPT, capable of solving complex problems and outperforming other AI models on benchmark features [8][9] - Gemini 3 has already attracted 650 million active users, and Alphabet's AI Overview has over 2 billion monthly users, indicating strong user engagement [10] - Google Cloud revenue, which includes AI services, rose by 34% in the third quarter to $15.2 billion, suggesting that the integration of Gemini is positively impacting sales [11] Group 3: Competitive Landscape - Nvidia currently dominates the AI processor market, holding an estimated 90% of the data center market with its GPUs, but appears to be wary of Alphabet's potential in the chip market [5] - OpenAI's CEO has expressed concern over Alphabet's advancements, indicating that Alphabet is successfully keeping pace with competitors in the AI space [9][12]