Meta Platforms Inc. (NASDAQ: META) is reportedly in discussions with Google’s parent company, Alphabet Inc. (NASDAQ: GOOGL), to invest billions of dollars in Google-owned chips for use in Meta’s data centers starting in 2027, according to The Information. The potential deal would position Google as a major competitor to semiconductor leader Nvidia (NASDAQ: NVDA) in the lucrative AI data-center chip market.

Google’s TPUs Move Beyond Its Own Data Centers

The talks reportedly include Meta renting Google Cloud’s Tensor Processing Units (TPUs) as early as 2026, signaling a strategic shift in Google’s approach. Historically, Google has limited TPU use to its own data centers, but expanding access to corporate clients could significantly grow the market for these AI-specific chips. TPUs are optimized for AI workloads, offering high-performance alternatives to Nvidia’s graphics processors, which are expensive and often supply-constrained.

Google Cloud executives have suggested that successfully entering this market could allow the company to capture up to 10% of Nvidia’s annual revenue, potentially worth billions of dollars. The deal would also mark a significant win for Google’s cloud business, which has gained momentum through AI adoption, strategic investments, and high-profile investors like Warren Buffett’s Berkshire Hathaway.

Market Reaction and Implications

Alphabet shares rose more than 4% in premarket trading, putting it on track for a historic $4 trillion market valuation. Broadcom (AVGO), which manufactures components for Google’s AI chips, also gained 2%, while Nvidia shares fell 3.2% amid concerns over increased competition.

Securing a chip deal with Meta, which has reportedly planned $72 billion in spending on AI hardware this year, would represent a major coup for Google. The move underscores the growing demand for custom AI chips as businesses look for alternatives to Nvidia’s dominant but costly GPU ecosystem. Companies like Anthropic have already expanded their Google deals to include up to one million TPUs, signaling a broader trend toward adopting Google’s AI hardware solutions.

Challenges to Compete with Nvidia

Despite Google’s progress, competing with Nvidia presents significant challenges. Nvidia’s ecosystem has been built over nearly two decades, anchored by its proprietary CUDA software platform, which more than 4 million developers worldwide rely on for AI and other applications. Dislodging Nvidia’s entrenched position will require Google to convince developers and enterprise clients to adopt its TPU technology at scale.

Nonetheless, Google’s aggressive push into AI hardware, coupled with its cloud growth engine and Gemini 3 AI model, positions it as a serious contender in the AI chip market. Renting TPUs to enterprise clients and data centers represents a growing revenue stream, potentially reshaping competition in the multi-billion-dollar AI infrastructure sector.

Outlook for AI Hardware Market

As AI adoption accelerates across industries, the demand for specialized chips is expected to surge. Meta’s potential investment in Google chips highlights the increasing strategic importance of AI infrastructure partnerships in the tech ecosystem. Alphabet, Meta, and Nvidia are all vying for market share in this high-stakes competition, which could determine the future of enterprise AI deployment globally.