Alphabet is developing its own custom-made Tensor Processing Units (TPUs) that are exclusively used for Google Cloud servers. In Q2 this year, Alphabet (NASDAQ: GOOG) announced it would sell the chips directly to external data centers. This development lands Alphabet in Nvidia’s territory of selling hardware and competes directly with the giant. However, Alphabet does not manufacture or package these chips entirely in-house and seeks business from other manufacturing firms.
The manufacturing firms that Alphabet has collaborated with stand to gain additional revenue from the sales. The commercial agreement covers inference accelerators, storage controllers, and near-memory compute. In this article, we will explain which stocks to buy and hold now that Google has started selling its custom-made chips to external data centers. Accumulating these equities can prove to be beneficial once Alphabet sells out its chips.
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Stocks To Buy as Google Sells AI Chips to Data Centers
Broadcom (NASDAQ: AVGO) is the stock to buy as Google starts selling its custom-made AI chips because it gets paid no matter who buys. Alphabet has a long-term agreement with Broadcom to develop and supply custom TPUs for Google’s chips. A second agreement covers Broadcom supplying networking and other components for Google’s next-generation AI racks. This agreement runs until 2031, giving the company additional business for the next five years.
This new and additional revenue will show up in Broadcom’s AI semiconductor revenue. The last quarterly earnings call had revenue of $10.8 billion, which was up 143% year over year. It reached $16.7 billion in the fiscal third quarter, reported in early September. Estimates suggest it could reach a high of $21.7 billion in the next quarter, making an entry position in Broadcom stock a strong contender, as additional sales from Google chips can boost its prospects further. A wait period of five years could reward investors with better returns.