Key Takeaways
- Morgan Stanley forecasts Alphabet’s custom TPU chip business could deliver $200B in revenue within the next several years
- Brian Nowak, Morgan Stanley analyst, increased TPU pricing estimates to $27bn per gigawatt with 30% gross margins, versus prior $20bn/GW at 20% margins
- The firm anticipates $84bn in 2027 and $108bn in 2028 from TPU-driven Google Cloud sales
- Wall Street consensus on GOOGL stands at “Buy” with an average price target reaching $420.19
- Major institutional players like Vanguard and Norges Bank continue expanding their GOOGL holdings
Shares of Alphabet (GOOGL) began Tuesday’s session at $348.06 and climbed approximately 0.9% during morning trading following Morgan Stanley’s enhanced projections for the tech giant’s proprietary chip division.
Brian Nowak, an analyst at Morgan Stanley, projects that Google stands to capture approximately $200 billion in revenue from its tensor processing unit (TPU) technology in the years ahead. This substantial figure is backed by detailed calculations that reveal the reasoning behind such optimistic expectations.
The critical adjustment centers on pricing metrics. Nowak has revised his TPU pricing model upward to $27 billion per gigawatt, representing a significant increase from the earlier $20bn/GW projection. Additionally, the gross margin forecast has been elevated to 30%, up from the previous 20% estimate.
Industry reports have indicated that Google has secured commitments to provide approximately one million TPU units for roughly $35 billion. According to Nowak, this information supports the case for higher chip pricing than previously anticipated.
A broader custom silicon partnership between Google and Marvell has also contributed to these revised projections, with Nowak’s research team interpreting the agreement as confirmation of improved TPU pricing power.
Google Cloud Revenue Outlook
Based on these refreshed assumptions, Morgan Stanley anticipates Google will deliver 0.3 gigawatts of TPU infrastructure in the latter half of 2026, followed by 3.2 gigawatts throughout 2027, and 4.2 gigawatts during 2028.
These volume projections correspond to TPU-driven Google Cloud revenues of $84 billion in 2027 and $108 billion in 2028.
Nowak maintains his Overweight stance on GOOGL with a $400 price objective.
Technical indicators show GOOGL’s 50-day moving average at $351.57, with the 200-day moving average positioned at $341.41. Over the trailing twelve months, shares have fluctuated within a range of $205.28 to $408.61.
Wall Street Sentiment and Institutional Holdings
Analyst sentiment remains overwhelmingly positive across the Street. The stock carries six Strong Buy ratings, 44 Buy recommendations, and four Hold positions. The average price target stands at $420.19.
Guggenheim maintains a $450 price objective on shares, while Arete Research increased its target to $425 this May. JPMorgan reaffirmed its Buy recommendation in May as well. Zacks Research adjusted its rating to Hold in August.
Among institutional investors, Vanguard expanded its position by 2.4% during the fourth quarter, accumulating more than 528 million shares valued at approximately $165.6 billion. Norges Bank initiated a fresh position worth about $30.5 billion in Q4.
The North Dakota State Investment Board increased its stake by 2.0% in the second quarter, bringing total holdings to 171,763 shares valued at $61.4 million.
Alphabet’s latest quarterly results, released on July 22nd, showed earnings of $9.11 per share, significantly exceeding the $2.89 consensus forecast. Quarterly revenue reached $119.80 billion, surpassing analyst projections of $117.07 billion. The company maintains a quarterly dividend of $0.22 per share, with the next payment scheduled for September 14th.
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