The Report
Nvidia shares fell Tuesday after The Information reported that Meta is considering using chips designed by Google.
Shares of Nvidia were 4% lower in premarket trade. Google-parent Alphabet was trading 4.2% higher after a more than 6% rally on Monday.
The Information reported Monday that Meta is considering using Google's tensor processing units (TPUs) in its data centers in 2027. Meta may also rent TPUs from Google's cloud unit next year.
Google's Response
"Google Cloud is experiencing accelerating demand for both our custom TPUs and NVIDIA GPUs; we are committed to supporting both, as we have for years," a Google spokesperson told CNBC.
The TPU Story
Google deployed its first-generation TPU in 2016. It was initially designed for internal use for its cloud computing business.
Since then, Google has launched more advanced versions of its chip designed to handle artificial intelligence workloads.
TPUs are a customized chip. Experts say this gives Google an advantage over rivals as it can offer customers a highly efficient product for AI.
Why It Matters
If Meta uses the TPUs, it would be a big win for Google and potential validation of the technology.
Meta is one of the largest buyers of AI chips. Switching from Nvidia to Google would represent a major shift in the market.
The Broadcom Boost
Shares of Broadcom, which helps Google design its TPUs, were up more than 2% in premarket trade Tuesday. That follows an 11% rise the day before.
Broadcom has become a key beneficiary of Google's TPU push as the chipmaker helps design and manufacture the custom AI chips.
The Bottom Line
Nvidia fell 4% on reports Meta may use Google's TPU chips in 2027 data centers, validating Google's custom silicon strategy and boosting Alphabet 4.2% and Broadcom 2% while threatening Nvidia's dominance in AI chips.