TLDR
- AMD stock dropped 9% and Nvidia fell 6.5% after reports that Meta may use Google’s AI chips instead of their processors
- Google is pitching its Tensor Processing Units (TPUs) to major customers including Meta and large financial institutions
- Meta could invest billions in Google’s TPUs starting in 2027 and may rent TPU capacity as early as next year
- The news rattled the semiconductor sector, with Google shares rising 3% while chip makers declined
- AMD has been trading strong recently after projecting 35% compound annual revenue growth over the next three to five years
AMD shares tanked 9% on Tuesday morning while Nvidia dropped 6.5% following reports that Meta Platforms is considering a major shift in its AI hardware strategy. The move could reshape the competitive landscape for AI chip suppliers.
Advanced Micro Devices, Inc., AMD
The Information reported that Google has started actively marketing its Tensor Processing Units to enterprise customers. Meta and several large financial institutions are among the potential buyers being courted.
Meta is evaluating an investment of billions of dollars into Google’s TPUs for its data centers. The deployment could start in 2027 if the deal moves forward.
The social media giant might also begin renting TPU capacity from Google Cloud as soon as next year. Meta currently ranks among Nvidia’s largest GPU customers.
Google shares jumped 3% on the news. Broadcom, which manufactures Google’s TPU hardware, traded flat after some initial premarket gains.
Broader Market Reaction
The semiconductor sector felt the impact across the board. SoftBank Group dropped 10% on concerns that Google’s Gemini model could intensify competition with OpenAI.
Both Nvidia and AMD supply chips to OpenAI. The potential loss of Meta as a customer or reduced orders from the tech giant spooked investors.
AMD got hit harder than Nvidia despite both companies facing the same competitive threat. Investors appear concerned that increased competition in the AI accelerator market could slow AMD’s momentum.
AMD’s Recent Performance
The stock has been on a strong run in recent months. AMD projected a 35% compound annual revenue growth rate over the next three to five years at a recent financial analyst day.
The company’s AI data center business is expected to drive this growth. These projections made before Tuesday’s sell-off painted an optimistic picture.
AMD currently trades about 9.3% below its 50-day moving average of $215.58. This suggests bearish short-term sentiment has taken hold.
The stock still sits roughly 31.3% above its 200-day moving average of $148.98. The longer-term bullish trend remains intact despite recent volatility.
Technical Indicators
The Relative Strength Index stands at 43.21, placing AMD in neutral territory. The stock is neither overbought nor oversold at current levels.
This positioning could allow for a rebound if buying interest returns. The 50-day moving average may act as a support level going forward.
Google’s TPUs are designed to optimize performance and cost across AI training and inference tasks. The chips are already available for rent on Google Cloud.
Meta’s potential shift represents a direct challenge to Nvidia’s dominance in the AI chip market. AMD also faces increased pressure as it works to gain market share in AI processors.
The reported deal would see Meta spending billions on Google’s AI chips starting in 2027.
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