Meta to use Google's AI chips. New challenge for NVIDIA?
What's the story
Meta Platforms is reportedly in talks with Google to use its Tensor AI chips in its data centers. The deal, which could be worth billions, is expected to see Meta using Google's tensor processing units (TPUs) in 2027. This comes as a major development for the tech industry and has already affected stock prices of major players involved. Following the announcement, NVIDIA shares tumbled while Alphabet shares climbed.
Strategic move
Meta's potential shift from NVIDIA to Google
The deal with Google could make its Tensor chips a viable alternative to NVIDIA's, which are currently the gold standard for AI computing power. This would be a major shift for Meta, which has been one of NVIDIA's biggest customers since 2022. The company had also announced significant investments in US infrastructure and jobs over three years, including in AI data centers.
Market impact
Google's TPUs: A cost-effective alternative
Google is pushing its TPUs as a cheaper alternative to NVIDIA chips for companies with higher security standards. The tech giant hopes to capture 10% of NVIDIA's revenue from this business. Notably, Google already supplies up to one million Tensor chips to Anthropic PBC, which Seaport analyst Jay Goldberg called "really powerful validation" for TPUs.
Investment strategy
Meta's AI development and future plans
Bloomberg Intelligence analysts Mandeep Singh and Robert Biggar have said that Meta's capital expenditure of at least $100 billion for 2026 suggests it will spend $40-$50 billion on inferencing-chip capacity in the coming years. This indicates the company's commitment to AI development and suggests a potential shift toward Google's Tensor chips.
Industry dynamics
NVIDIA's market dominance and potential competition
NVIDIA's GPUs, including the Blackwell series, have been the "brain" of video games for the last decade. They are well-suited for training AI models due to their ability to handle large amounts of data and computations. However, Google's TPUs are specialized microchips designed specifically for AI compute tasks. This makes them a potential competitor in the AI chip market.