Should You Buy Alphabet Stock Now That Google Will Let Customers Run Its AI Chips in Their Own Data Centers?
The search giant's turning its AI chips into hardware it sells. Is the stock a buy around 28% below its peak?
Alphabet has expanded access to its AI chips with the introduction of new versions, known as TPU 8tx, to be installed in customers' data centers. Initially, using these chips required renting them in Google's cloud. However, Alphabet started selling TPU systems to customers running their own data centers in the second quarter, with almost 100 customers already utilizing them.
The TPU 8tx is designed for confidential work, particularly for regulated firms and governments that require sensitive data to remain protected during processing. Google Cloud's CEO, Thomas Kurian, highlighted this feature during Alphabet's third-quarter earnings call. The company's cloud revenue more than doubled year-over-year to $30.7 billion, with TPU system sales making a significant contribution.
While Alphabet expects the majority of revenue from these chip sales to be recognized in 2027, the move could potentially open up new revenue streams for the company, as not all customers can move their data to the cloud. However, the impact on Alphabet's stock price is not immediate, and the company continues to invest heavily in capital spending, which may result in negative free cash flow for a few more quarters.
Despite this, the company's cloud revenue growth and the potential new revenue source from chip sales make Alphabet an attractive investment option according to The Motley Fool's analysts.
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