Nvidia (NVDA) Stock: Company Says Its GPUs Are a Generation Ahead of Google’s AI Chips

TLDR

• Nvidia shares fell 2.6% Tuesday as reports emerged that Google plans to sell AI chips directly to Meta in a multibillion-dollar 2027 deal
• Google’s move would shift from renting TPUs through cloud services to selling them outright, potentially taking 10% of Nvidia’s revenue
• Nvidia defended its position, stating its technology is “a generation ahead” with greater flexibility than Google’s custom chips
• Tech giants like Amazon and Microsoft have also developed competing AI processors while remaining Nvidia customers
• The stock decline comes as AI market concerns grow and Nvidia’s biggest customers become its largest competitive threats

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Nvidia stock dropped 2.6% Tuesday after reports surfaced about Google’s plans to expand its AI chip business. The Information revealed that Google is negotiating with Meta for a multibillion-dollar deal starting in 2027.

NVIDIA Corporation, NVDA

The potential agreement would have Meta using Google’s tensor processing units in its data centers. This represents a major change for Google’s chip strategy.

Currently, Google only rents TPUs through its cloud platform. The chips never leave Google’s data centers. But this new approach suggests Google wants to compete more directly with Nvidia.

Sources say Google believes it could capture up to 10% of Nvidia’s annual revenue. The company is also pitching TPUs to other cloud customers beyond Meta.

Customers Becoming Competitors

Nvidia holds over 90% of the AI chip market. But that dominance faces pressure from an unexpected source: its own customers.

Google just released Gemini 3, an advanced AI model trained entirely on TPUs rather than Nvidia GPUs. Amazon completed a massive deal with Anthropic involving 500,000 custom AI chips. Microsoft has built its own processors too.

Advanced Micro Devices stock also fell more than 4% on the news. Investors appear concerned about growing competition in the AI chip space.

Market Concerns Mount

Investment firm DA Davidson estimated in September that Google’s TPU business and DeepMind could be worth $900 billion. The firm reported “considerable interest” from AI labs in purchasing Google’s chips.

Nvidia CEO Jensen Huang addressed TPU competition during an earnings call this month. He noted that Google remains a Nvidia customer and that Gemini works on Nvidia technology.

The stock drop reversed Monday’s gains as tech stocks attempted to recover from recent declines. Concerns about AI market valuations have pressured Nvidia and other tech giants in recent months.

Investor Michael Burry recently bet against Nvidia, comparing the AI market to the dot-com bubble. Critics have also questioned circular investments where Nvidia funds its own customers.

Nvidia sent a weekend memo to analysts defending its practices. The company called its investments “completely transparent” and said portfolio companies show strong revenue growth.

Google’s TPU expansion could reshape the AI infrastructure market. The company’s chips are custom-designed ASICs, unlike Nvidia’s more flexible GPUs. Nvidia argues its processors offer greater versatility and can handle more diverse workloads.

The Information’s report indicates Google views direct chip sales as a growth opportunity beyond its current cloud rental model.

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