This article first appeared on GuruFocus.
Alphabet (GOOGL, Financials) could add billions of dollars in new revenue as production of its Tensor Processing Units accelerates, according to a report from Morgan Stanley. The firm said supply chain checks from its Asia semiconductor team indicate that TPU availability is improving and could support a more aggressive commercial strategy.
Analyst Brian Nowak said updated projections call for about 5 million TPUs to be produced in 2027 and roughly 7 million in 2028, compared with earlier expectations of 3 million and 3.2 million units, respectively. The upward revisions reflect signals gathered by analyst Charlie Chan pointing to greater scale in Google’s AI chip manufacturing pipeline.
Morgan Stanley reiterated that an incremental 500,000 TPU sales could generate about $13 billion in revenue and add $0.40 to Alphabet’s earnings per share in 2027. The firm has previously highlighted opportunities for Google to sell TPUs directly to third-party data center operators, positioning the chips as a complement to Google Cloud services.
Most of the added production capacity is expected to support Alphabet’s own AI workloads and cloud demand. However, the analysts said the rapid ramp totaling an expected 12 million units over two years suggests broader commercial ambitions as enterprises seek high-performance compute to train and deploy AI models.
The revised supply outlook also contributed to Morgan Stanley’s decision to upgrade MediaTek, citing stronger demand across the AI ASIC supply chain.
