A New AI Chip Battle Takes Shape — and Nvidia Feels the Hit
Nvidia shares dropped sharply Tuesday after The Information reported that Google is in advanced discussions with Meta to supply billions of dollars’ worth of Google’s AI chips — beginning in 2027.
If finalized, the deal would mark a major strategy shift for Google, which currently rents access to its tensor processing units (TPUs) through Google Cloud. These chips have historically stayed inside Google’s walls. Selling them outright would put Google into direct competition with Nvidia at a scale not previously seen.
Google is also pitching TPUs to other cloud customers, with internal projections suggesting the company could steal as much as 10% of Nvidia’s annual revenue, according to the report.
Shares of Nvidia fell as much as 6.5% in early trading. AMD, another competitor in the AI chip race, slid more than 8%.
Big Tech Moves In-House — and Nvidia’s Customers Become Its Competitors
The development highlights a structural shift shaking the AI hardware market:
Nvidia’s largest customers are building — and now potentially selling — their own chips.
- Amazon has rolled out massive deployments of its Trainium and Inferentia chips, recently renting 500,000 custom AI chips to Anthropic.
- Microsoft is shipping its Maia acceleration chips as it works to reduce reliance on Nvidia.
- Google has aggressively advanced TPU development and struck its own multibillion-dollar deals with Anthropic.
With Meta evaluating TPUs and OpenAI having tested Google’s chips this summer, the competitive map for AI compute is rapidly shifting away from pure Nvidia dependency.
Investment firm DA Davidson previously estimated Google’s TPU + DeepMind segment could be worth $900 billion, underscoring the scale of what’s at stake.
Nvidia Pushes Back Against Bubble Fears
The report comes during a period of heightened scrutiny around Nvidia’s growth, its strategic investments, and concerns about circular AI funding deals.
In a memo sent to Wall Street analysts over the weekend — obtained by Yahoo Finance — Nvidia rejected comparisons to past corporate blow-ups and defended the economic strength of its core business:
- “NVIDIA is completely transparent” about strategic investments.
- Portfolio companies are showing strong revenue growth and customer demand.
- Nvidia said it bears no resemblance to historical fraud cases like Enron or WorldCom, emphasizing its transparent reporting and robust fundamentals.
Still, Nvidia’s stock had already been under pressure as prominent investors — including Michael Burry — warn that AI markets may be echoing dot-com-era exuberance.
WSA Take
This is the scenario the market has been waiting for — and worrying about. For the first time, Google appears ready to commercialize TPUs at scale, directly targeting Nvidia’s strongest profit engine. Meta’s interest accelerates the threat: if hyperscalers begin sourcing chips from each other instead of Nvidia, the competitive landscape changes overnight.
At the same time, Nvidia’s defense is clear: demand for AI compute is so large that even aggressive hyperscaler chip strategies may not meaningfully dent near-term momentum.
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