Alphabet Takes Aim at Nvidia's $300 Billion AI Market

Nvidia's dominance in AI accelerators is being challenged by Alphabet, which recently started selling custom AI chips called Tensor Processing Units (TPUs) directly to customers. Gil Luria at D.A. Davidson estimates Alphabet could capture 20% of the AI infrastructure market if it leans into external sales of TPU systems.

Alphabet's stock trades at 19 times earnings, a discount to the three-year average of 25 times earnings. This valuation looks cheap compared to forward earnings estimates.

Nvidia has accounted for more than 80% of AI accelerator sales, but its market share is likely to fall as more companies turn to custom silicon solutions. Alphabet's TPUs are designed specifically for AI tasks and could become a $100+ billion revenue stream by 2030.