Google parent company Alphabet is in the talks to offer its Tensor AI chips to Meta, deepening its rivalry with Nvidia. If the agreement goes through, Meta would use Google’s Tensor Processing Units (TPUs) by 2027, according to a report by The Information. Meta also may rent chips from Google’s cloud division next year, the news outlet said.
This agreement would position TPUs as a challenge to the dominance of Nvidia’s AI chips in the industry. Google and AI chip partner Broadcom (AVGO) rose early Tuesday. Nvidia stock and Advanced Micro Devices (AMD) fell.
“Google Cloud is experiencing accelerating demand for both our custom TPUs and Nvidia GPUs; we are committed to supporting both, as we have for years,” a spokesperson for Google said.
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The tensor chip, first developed more than 10 years ago especially for AI tasks, is gaining momentum outside its home company as a way to train and run complex AI models. Tech companies who want to reduce dependence on Nvidia are increasingly seeing it as an alternative.
Graphics processing units, or GPUs, the part of the chip market dominated by Nvidia, were created to speed the rendering of graphics mainly in video games and other visual-effects applications. They turned out to be well-suited to training AI models because they can handle large amounts of data and computations. TPUs, on the other hand, are a type of specialized product known as application-specific integrated circuits, or microchips that were designed for a discrete purpose. The tensor chips were also adapted as an accelerator for AI and machine learning tasks in Google’s own applications.
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Shares of Nvidia were 4% lower in premarket trade. Google-parent Alphabet was trading 4.2% higher after a more than 6% rally on Monday. Shares of Broadcom, which helps Google design its TPUs, were up more than 2% in premarket trade on Tuesday after an 11% rise the day before. AMD fell 6.8% in premarket trade.
Meta is among the biggest spenders on AI infrastructure, with the company projecting its capital expenditure to stand between $70 billion to $72 billion this year. The share price move comes amid a debate over whether there is an “AI Bubble” and stretched tech company valuations. Nvidia has played a major role in the debate, and the company last week reported a stronger-than-expected sale forecast for the current quarter but technology stocks fell after.