The media has learned about Meta's intention to buy AI chips from Google. Does this threaten Nvidia?

Google could sign a multi-billion dollar contract to supply proprietary AI chips to Meta Platforms, which owns Instagram and WhatsApp, online publication The Information has learned. The market reacted with a drop in Nvidia's quotes, seeing the potential deal between Google and Meta as a risk to the company's dominance in the AI computing sector.

Meta Platforms is in talks to buy Google's AI chips, known as Tensor Processing Units or TPUs, for billions of dollars, according to The Information's source. Meta plans to install the chips in its data centers in 2027, the source said.

Meta representatives declined to comment to Bloomberg on the matter, and Google did not respond to the agency's request for comment.

A deal with Meta, one of the world's leading spenders on data centers and AI development, would be a win for Google, Bloomberg writes. A large order from Meta will allow Google's TPU to establish itself as an alternative to Nvidia chips - the "gold standard" for large tech companies and startups that need computing power to build and run AI platforms, the agency notes.

Quotes of Nvidia fell on the postmarket in New York by 1.5%, reversing after a growth of 2.05% at the end of the main trading. Shares of Google jumped by 2.65% - and this is after the main session they added 6.3%. In the morning of November 25, securities of local partners of the search giant soared at the trading in Asia. Thus, shares of South Korean supplier of printed circuit boards IsuPetasys added 18% in the moment, setting a new record. Taiwan's MediaTek rose by 5%.

Based on Meta's capital expenditure forecast for 2026 of at least $100 billion, the company will spend at least $40-50 billion on chips for AI operation, Bloomberg analysts Mandeep Singh and Robert Biggar estimated. According to them, Meta's interest in Google's TPUs suggests that in the near future, neural network developers are likely to consider Google as an additional supplier of chips for operating AI models.

Wall Street is optimistic about the shares of Nvidia and Alphabet, the parent company of Google, but their growth potential is assessed differently. According to FactSet, the consensus ratings for both tech giants are Buy. But if the average target price of Nvidia shares at $254 per piece suggests an upside of 39% from the current price, Alphabet's quotes have almost caught up with expectations.

Google's tensor processors were designed from the very beginning for a specific purpose - to work with artificial intelligence. In contrast, Nvidia's chips were originally designed to work with graphics in video games, but later proved to be effective for training neural networks as well.

In late October, Google struck a deal to supply startup Anthropic with up to 1 million of its TPUs. The processors from Google will be used to train and run Claude's AI models. The chatbot of the same name, Anthropic's flagship product, is based on these models.

This article was AI-translated and verified by a human editor