Alphabet's TPU Buildout Threatens NVIDIA's Revenue Ceiling
Alphabet and NVIDIA reported strong summer quarters, both benefiting from the AI boom. Alphabet's Google Cloud revenue grew 82% to $24.77B, driven by enterprise AI infrastructure. The Data Center segment at NVIDIA reached $89.02B, with networking growing 138%. Customers are buying complete systems.
NVIDIA does not report Google's share of sales. However, it is estimated that Google sits inside a hyperscale category worth $49 billion, which grew 13% sequentially. Revenue from neoclouds, enterprises and government buyers reached $40 billion.
Google Cloud's backlog was over $460 billion after Q1. Alphabet is building out its TPU-powered stack, which could potentially pull GPU prices lower. NVIDIA's gross margin, expected to bottom near 71%, will be the first signal if Google's expansion starts affecting GPU prices.