Alphabet (NASDAQ:GOOG) may be on the verge of unlocking a major new revenue engine as fresh supply chain checks point to a surge in production of its in-house Tensor Processing Units (TPUs), according to Morgan Stanley.
Analyst Brian Nowak said the latest readouts from Asia indicate that “TPU supply uncertainty may be less of a question,” suggesting Google could be positioned to expand external sales of its custom AI accelerators.
Morgan Stanley’s Asia semiconductor team now projects “~5mn/~7mn TPUs to be produced in ’27/’28, up from ~3mn/3.2mn previously.” The upward revision—based on supply chain insights gathered by analyst Charlie Chan—indicates Google appears to be gearing up for much broader TPU deployment.
The potential financial upside is significant. The bank reiterated that “every 500k of TPU chip sales could potentially add ~$13bn of revenue and $.40 to GOOGL EPS in ’27.”
Morgan Stanley has previously outlined how Google could distribute TPUs directly to third-party data centers, arguing that external chip sales could become an important extension of Google Cloud Platform’s capabilities.
While Google is expected to consume most of the additional TPUs internally for its AI workloads and GCP demand, Nowak noted that the sharp increase in anticipated volumes — “12mn TPUs over 2 years (vs 7.9mn over the previous 4 years),” — signals room for a broader commercial strategy.
The analysts say these developments could be “tea leaves” pointing toward an emerging TPU sales initiative as Google moves to capitalize on surging industry demand for advanced AI compute.
Morgan Stanley also cited the stronger supply outlook as a factor in its decision to upgrade MediaTek to Overweight, highlighting rising AI ASIC demand throughout the semiconductor chain.