Key Takeaways
- Morgan Stanley forecasts Alphabet could achieve $200 billion in revenue from custom TPU chip sales in upcoming years
- Brian Nowak, the firm’s analyst, increased TPU pricing projections to $27bn per gigawatt with 30% gross margins, versus prior estimates of $20bn/GW at 20% margins
- The investment bank anticipates $84 billion and $108 billion in Google Cloud TPU revenue for 2027 and 2028
- Wall Street consensus maintains a “Buy” rating on GOOGL with an average price target of $420.19
- Major institutional holders like Vanguard and Norges Bank have expanded their GOOGL ownership stakes
Shares of Alphabet (GOOGL) began Tuesday’s session at $348.06 and climbed approximately 0.9% during early market hours following Morgan Stanley’s upgraded forecast for the tech giant’s proprietary chip operations.
Brian Nowak, an analyst at Morgan Stanley, projected that Google stands to capture roughly $200 billion in revenue linked to its tensor processing unit (TPU) technology in the years ahead. The substantial forecast comes with detailed assumptions backing the calculation.
The critical revision centers on pricing dynamics. Nowak adjusted his TPU sales price forecast upward to $27 billion per gigawatt, a notable increase from the earlier $20bn/GW projection. Simultaneously, he boosted the gross margin forecast to 30% from a prior 20% estimate.
Recent industry reports indicated Google has secured commitments to deliver approximately one million TPUs under deals valued near $35 billion. According to Nowak, these figures support the case for elevated chip pricing expectations.
Additionally, a broadened custom silicon partnership between Google and Marvell influenced the revised projections, with Nowak’s research team interpreting the arrangement as evidence of robust TPU pricing power.
Google Cloud Revenue Estimates
Building on these refreshed assumptions, Morgan Stanley now anticipates Google will ship 0.3 gigawatts of TPU infrastructure during the latter half of 2026, followed by 3.2 gigawatts in 2027, and 4.2 gigawatts in 2028.
These volume projections correspond to TPU-driven Google Cloud revenues of $84 billion in 2027 and $108 billion in 2028.
Nowak maintained his Overweight recommendation on GOOGL with a price target of $400 per share.
The stock’s 50-day moving average currently stands at $351.57, while the 200-day moving average registers at $341.41. Over the trailing twelve months, GOOGL has fluctuated within a range of $205.28 to $408.61.
Wall Street Sentiment and Institutional Movements
Analyst sentiment remains overwhelmingly positive across the Street. Six research firms assign a Strong Buy rating, 44 maintain Buy recommendations, and four hold neutral positions. The average price target stands at $420.19.
Guggenheim maintains a $450 price objective on GOOGL, while Arete Research increased its target to $425 this past May. JPMorgan reaffirmed its Buy stance in May. Meanwhile, Zacks downgraded the stock to Hold in August.
Among institutional investors, Vanguard expanded its holdings by 2.4% during the fourth quarter, accumulating more than 528 million shares with an estimated value exceeding $165.6 billion. Norges Bank initiated a fresh position valued at approximately $30.5 billion in the same quarter.
North Dakota State Investment Board similarly increased its allocation by 2.0% in the second quarter, raising its GOOGL holdings to 171,763 shares worth $61.4 million.
Alphabet’s latest quarterly results, released on July 22nd, showed earnings of $9.11 per share, significantly exceeding the $2.89 consensus projection. The quarter’s revenue reached $119.80 billion, surpassing analyst forecasts of $117.07 billion. The company distributes a quarterly dividend of $0.22 per share, with the next payment scheduled for September 14th.
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