TLDR
- Meta is considering renting or buying Google’s custom TPU chips starting in 2027, potentially worth billions of dollars
- Nvidia and AMD stocks dropped 6% and 8% respectively on concerns about increased competition from Google’s chips
- Bank of America analyst Vivek Arya maintains Buy ratings on both Nvidia and AMD despite the sell-off
- Arya projects the AI data center market will grow from $242 billion today to $1.2 trillion by 2030
- Nvidia currently trades at 25x forward earnings while expecting over 40% growth in sales and earnings per share
Nvidia and AMD shares fell sharply on Monday after reports emerged that Meta Platforms is exploring a deal to rent or purchase Google’s custom Tensor Processing Units. The Information reported that the potential agreement could begin in 2027 and be worth billions of dollars.
Nvidia stock dropped 6% while AMD declined 8% on the news. The sell-off reflects investor concerns about growing competition in the AI chip market. Google’s TPU chips represent an alternative to the GPUs that Nvidia and AMD currently supply to Meta’s data centers.
The reported discussions between Meta and Google triggered a rotation across AI-related stocks. Alphabet and Broadcom shares rallied on the news. Several optical and silicon suppliers connected to Google’s hardware ecosystem also saw gains.
Market Reacts to TPU Competition
Bank of America analyst Vivek Arya pushed back against the negative market reaction. He maintained Buy ratings on both Nvidia and AMD. Arya ranks as a five-star analyst on TipRanks with a 59% success rate and 17.4% average return per rating.
Arya projects the AI data center market will expand from $242 billion today to $1.2 trillion by 2030. This represents a fivefold increase over the next five years. He expects Nvidia to maintain roughly 75% market share, down slightly from the current 85%.
The analyst noted that Nvidia trades at approximately 25 times forward earnings. He considers this valuation attractive given the company’s expected growth of over 40% in both sales and earnings per share. Arya said the current price treats Nvidia like an ordinary company rather than a market leader.
AMD currently trades at 33 times its projected 2026 earnings. The company benefits from multiple revenue streams including CPUs, GPUs, embedded systems, and gaming. These diverse growth drivers provide AMD with multiple paths to expand its business.
TPU Deal Details Remain Uncertain
No formal agreement between Meta and Google has been confirmed. The reported discussions remain in early stages. Any potential deal would not begin until 2027, leaving time for market conditions to change.
Mizuho analyst Jordan Klein described the current market movement as part of a “winner-take-all trade” in AI stocks. Active fund managers have been rotating capital toward Google and its TPU platform over recent weeks. Klein warned that many investors feel unable to fight this trend late in the year.
Broadcom also factors into the competitive landscape. Arya expects the company to achieve over 100% AI sales growth in 2026 due to TPU and Anthropic projects. However, expanded Google TPU licensing could reduce some of Broadcom’s opportunities in custom chip designs.
Klein cautioned against viewing AI leadership as settled in late 2025. The AI race will likely see multiple lead changes as companies invest heavily in compute infrastructure. He compared the situation to earlier this year when Google was widely seen as lagging behind OpenAI.
Meta has not commented on the reported TPU discussions. Google and Broadcom also declined to provide statements. The three companies continue their regular AI infrastructure development programs.
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