Morgan Stanley Sees $200 Billion in Revenue from Google's Custom AI Chip Business

Google's custom AI chip business is expected to generate $200 billion in revenue over the next few years, according to Morgan Stanley. This estimate is based on the tech company's TPU (Tensor Processing Unit) sales, which have shown stronger economics than previously modeled.

Morgan Stanley analyst Brian Nowak maintained a Buy rating and a $400 price target for Google (GOOGL). He expects the company to produce about $84 billion in TPU-related Google Cloud revenue in 2027 and $108 billion in 2028. This is driven by the higher pricing assumption of TPUs, which could reach $27 billion per gigawatt.

The firm also raised its expected gross margin on those sales to 30% from 20%. The increased revenue potential is due to the scale of TPU systems being sold, with Morgan Stanley now expecting Google to sell 0.3 gigawatts in the second half of 2026, jumping to 3.2 gigawatts in 2027 and 4.2 gigawatts in 2028.

This scale is what's driving the $84 billion Google Cloud revenue estimate for 2027 and the $108 billion estimate for 2028. Separately, Google's custom-chip agreement with Marvell Technology (MRVL) also supports Morgan Stanley's view that TPU pricing could be stronger than previously expected.