Nvidia-Google AI chip rivalry escalates on report of Meta talks; Nvidia shares drop 6%

[NEW YORK] Meta Platforms is in talks to spend billions on Google’s AI chips, The Information reported, adding to a months-long share rally as the search giant has made the case it can rival Nvidia as a leader in artificial intelligence technology.

A deal would signal growing momentum for Google’s chips and long-term potential to challenge Nvidia’s market dominance, after the company earlier agreed to supply up to 1 million chips to Anthropic PBC.

Google owner Alphabet is on track to hit a US$4 trillion market valuation for the first time when trading opens in New York on Wednesday. Nvidia’s shares were down more than 6 per cent after markets opened.

Meta is in discussions to use the Google chips – known as tensor processing units, or TPUs – in data centres in 2027, The Information reported, citing an unidentified person familiar with the talks. Meta also may rent chips from Google’s cloud division next year, the news outlet said.

An agreement would help establish TPUs as an alternative to Nvidia’s chips, the gold standard for big tech firms and startups from Meta to OpenAI that need computing power to develop and run artificial intelligence platforms.

Nvidia’s stock is already facing headwinds as investors fear a broader AI bubble. Michael Burry, immortalised in The Big Short for his bets against the housing market during the 2008 financial crisis, has scrutinised the chipmaker over circular AI deals, hardware depreciation and revenue recognition.

After Google’s Anthropic deal was announced, Seaport analyst Jay Goldberg called it a “really powerful validation” for TPUs. “A lot of people were already thinking about it, and a lot more people are probably thinking about it now,” he said.

“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.

Representatives for Meta declined to comment.

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Asian stocks related to Alphabet surged in early Tuesday trading in Asia. In South Korea, IsuPetasys, which supplies multilayered boards to Alphabet, jumped 18 per cent to a new intraday record. In Taiwan, MediaTek shares rose almost 5 per cent.

A deal with Meta – one of the biggest spenders globally on data centres and AI development – would mark a win for Google. But much depends on whether the tensor chips can demonstrate the power efficiency and computing muscle necessary to become a viable option in the long run.

The tensor chip – first developed more than 10 years ago especially for artificial intelligence tasks – is gaining momentum outside its home company as a way to train and run complex AI models. Its allure as an alternative has grown at a time companies around the world worry about an overreliance on Nvidia, in a market where even Advanced Micro Devices is a distant runner-up.

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 – but 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 specialised 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. Because Google and its DeepMind unit develop cutting-edge AI models like Gemini, the company has been able to take lessons from those teams back to the chip designers. At the same time, the ability to customise the chips has benefited the AI teams. BLOOMBERG