Shares of Nvidia (NVDA) rose as much as 5% in early trading Tuesday after a report that the AI chip maker could soon see increased competition from its own client, Google (GOOG, GOOGL).
The Information reported Monday that Google is in talks with Meta (META) to have Facebook’s parent company spend billions of dollars to use its artificial intelligence chips in data centers in 2027.
This would represent a big change to Google’s current chip business, in which the tech giant rents access to its chips called TPUs (tensor processing units) to artificial intelligence developers through Google Cloud. This means that the chips are confined to Google’s own data centers and are not sold externally as The Information report suggests.
The Information also said Google is inviting its other cloud customers to sell them TPUs in a move the company says could reap up to 10% of Nvidia’s annual revenue. Shares of Nvidia rival AMD (AMD) also fell more than 8% following the report.
The move is part of a growing dynamic in which Nvidia’s largest customers are becoming one of its biggest competitive threats.
In addition to Google, Amazon (AMZN) and Microsoft (MSFT) have developed their own AI chips. Amazon recently completed a massive data center project by leasing half a million of its custom AI chips to one of the leading AI developers, Anthropic. Google recently announced a big deal with Anthropic (ANTH.PVT), and OpenAI (OPAI.PVT) reportedly tested the company’s AI chips this summer.
Speculation has grown in recent months that Google is expanding its artificial intelligence chip business to compete more directly with Nvidia.
Investment firm DA Davidson published a note in September saying that “notable cutting-edge artificial intelligence labs” had shown “considerable interest” in purchasing Google’s TPUs. The firm estimates that Google’s TPU business and AI segment, DeepMind, could be worth $900 billion.
Following the latest news, falling Nvidia shares reversed a gain on Monday as technology stocks began to recover from a decline. Nvidia and other Big Tech stocks have come under pressure in recent months as concerns about the AI bubble have grown.
Nvidia has come under fire for circular AI deals (as the top AI chip maker has invested in its own clients), and famed “big bet” investor Michael Burry recently bet on the company’s decline, claiming the AI market is like the dot-com bubble.
However, in a memo sent to Wall Street analysts over the weekend, the company attempted to allay some of these concerns.
“NVIDIA is fully transparent about strategic investments… companies in NVIDIA’s strategic investment portfolio are growing their own revenues rapidly, indicating a path to profitability and strong underlying customer demand for AI applications,” the company said in the memo obtained by Yahoo Finance.