This article first appeared on GuruFocus.
Alphabet (GOOGL, Financials) made a big arrangement with Anthropic to give them up to a million of its bespoke Ironwood Tensor Processing Units (TPUs). This will make Alphabet’s role in powering AI workloads even bigger. The deal, which is worth tens of billions of dollars, could provide over a gigawatt of computing power starting in 2026.
Analysts at HSBC said the deal could mark a turning point for Google’s cloud business, noting that its in-house production of the chips improves margins compared with reselling external processors. HSBC lifted its 2026 revenue forecast for Google Cloud by $10 billion, or 13.5%, and raised its price target for Alphabet’s stock to $295 from $285 while maintaining a Buy rating.
Alphabet is the only Western cloud provider with a next-generation in-house chip already in production, analyst Paul Rossington wrote, pointing out that Microsoft’s Braga and Amazon’s Trainium3 are delayed until 2026.
Anthropic, which counts Amazon and Google among its investors, plans to use multiple cloud providers but said the expanded partnership will dramatically scale its computing capacity.
Alphabet shares rose 2% Friday following the announcement, as investors viewed the agreement as a sign of growing AI infrastructure demand and a potential new source of high-margin recurring revenue.
