NVIDIA's Dominance Shaken… Morgan Stanley: "Alphabet Market Cap to Reach $4 Trillion" [Stocks+]

Morgan Stanley: "AI chips could ship up to 1 million units by 2027"

Alphabet's market cap rose by about $300 billion over five trading days

Reports that Meta is discussing purchasing high-performance AI chips from Alphabet, Google's parent company, have led to speculation that Alphabet could challenge NVIDIA's dominant market share. In a report on the 26th (local time), Morgan Stanley said Alphabet's AI chip business could expand to ship up to 1 million units by 2027, making a $4 trillion market cap appear within reach.

Brian Nowak's analyst team at Morgan Stanley said, "The scenario in which Alphabet ships 500,000–1,000,000 tensor processing units (TPUs) it designed itself by 2027 is 'not unrealistic,'" adding that if external sales materialize, cloud revenue and profitability could improve significantly.

The TPU was originally developed as a chip for Alphabet's internal computations, but △surging AI computing demand △positive reviews of Alphabet TPU performance △industry GPU supply shortages have combined to sharply increase interest from external customers.

Recently, the foreign outlet The Information reported that Meta is negotiating the purchase of Alphabet TPUs worth billions of dollars. This has been interpreted as a potential signal that could unsettle the market structure dominated by NVIDIA.

NVIDIA currently accounts for about 90% of the AI semiconductor market, and its market capitalization, despite recent adjustments, stands at $4.3 trillion. Considering it reached $5 trillion just a month ago, it still holds a dominant position.

However, if Meta adopts Alphabet's chips, analysts on Wall Street say NVIDIA's market share could be partially eroded. That optimism has driven Alphabet's stock higher, lifting its market cap from about $3.5 trillion to about $3.8022 trillion over five trading days (as of the 26th). The closing price that day was $320.28.

Morgan Stanley calculated that for every 500,000 TPUs sold externally, cloud revenue would increase by 11% and earnings per share (EPS) would rise by 3%.

Analyst Nowak analyzed that Alphabet has been making massive investments in software optimization, system integration, and developer environment improvements to make TPUs compatible with more systems.

Alphabet's large AI language model (LLM) 'Gemini 3' receiving positive market assessments earlier this month also stimulated investor sentiment. The market views Gemini 3 as a serious competitive threat to OpenAI's ChatGPT.

Amid surging AI demand and the highlighted competitiveness of TPUs, Alphabet's stock has risen 56% over the past three months and 71% year-to-date. Meanwhile, NVIDIA's stock has fallen 2% over the past three months but remains up 32% for the year.

New York = Shin-Young Park, correspondent nyusos@hankyung.com