Morgan Stanley Sees Alphabet's Custom Chip Business Reaching $200B by 2028

Morgan Stanley has upgraded its forecast for Alphabet's (GOOGL) custom tensor processing unit (TPU) chip business, predicting it could generate $200 billion in revenue over the next several years. The firm's analyst, Brian Nowak, increased his TPU pricing projections to $27 billion per gigawatt with gross margins of 30%, up from previous estimates of $20 billion/GW at 20% margins.

The revised forecast assumes Google Cloud will deploy 0.3 gigawatts of TPU infrastructure in the latter half of 2026, followed by 3.2 gigawatts in 2027 and 4.2 gigawatts in 2028. These deployment figures correspond to projected Google Cloud TPU-driven revenues of $84 billion in 2027 and $108 billion in 2028.

Nowak maintained his Overweight recommendation on GOOGL shares with a price objective of $400. The analyst cited an enhanced custom silicon partnership between Google and Marvell as supporting evidence for the revised projections, noting it aligns with improved TPU pricing dynamics.