This article first appeared on GuruFocus.
Alphabet (NASDAQ:GOOGL) could generate as much as $200 billion in revenue from its in-house tensor processing unit chips over the next several years.
Morgan Stanley analyst Brian Nowak raised his estimates after reports indicated Alphabet may supply about one million TPUs, representing roughly 1.3 gigawatts of capacity, for approximately $35 billion. That implies pricing of about $27 billion per gigawatt.
The analyst now expects Google to sell about 0.3 gigawatts of TPU systems in the second half of 2026, followed by 3.2 gigawatts in 2027 and 4.2 gigawatts in 2028. Morgan Stanley estimates this could produce $84 billion and $108 billion in related Google Cloud revenue in 2027 and 2028, respectively.
The firm also pointed to Alphabet’s expanded custom-chip work with Marvell (MRVL), which may support higher TPU pricing and margins. Morgan Stanley now assumes a 30% gross margin on TPU system sales, compared with its previous 20% estimate.
For GOOG and GOOGL, rising TPU sales could provide another growth avenue for Google Cloud and strengthen the company’s AI infrastructure economics.
