Google and Amazon Unveil Custom Chips Rivaling Nvidia Performance

Google and Amazon have been quietly building custom chips that rival Nvidia's performance, according to their Q2 FY2026 results. Google's Tensor Processing Units (TPUs) drove a significant increase in Cloud revenue, with an 82% surge in sales and a 35.6% operating margin. The company is now recognizing revenue from TPU system sales delivered into customer data centers.

Amazon, on the other hand, leaned on its Trainium chip to power 37% AWS growth, the fastest pace in 18 quarters. The Trainium capacity is being leased in bulk to external AI labs, including Anthropic and OpenAI.

The two companies have taken different approaches to monetizing their silicon. Google's edge lies in efficiency, with Chrome engineers reportedly accelerating delivery by eight times using their own models on their own chips. Amazon's edge is distribution, with its Bedrock hosting platform now accounting for more customer spending than all prior quarters combined.

Both companies have guided a significant amount of CapEx for 2026, with Alphabet aiming to spend between $195B and $205B and Amazon estimating around $200B. However, both have negative free cash flow at present, making mid-2027 a critical checkpoint for recovery.