Morgan Stanley significantly raised its forecast for Google's TPU production: expected to reach 5 million units by 2027, with every 500,000 units "exported" potentially generating an additional $13 billion
Morgan Stanley expects that Google's TPU production will reach 5 million and 7 million units in 2027 and 2028, respectively, representing increases of 67% and 120% from previous expectations. This surge in production may indicate that Google will begin direct external sales of TPU chips. More strikingly, the report estimates that for every 500,000 TPUs sold externally, Google could generate an additional $13 billion in revenue and $0.40 in earnings per share
In the fierce competition for AI chips, Google's self-developed TPU is showing great potential to challenge the existing market landscape.
According to news from the Chasing Wind Trading Desk, Morgan Stanley's latest research report released on December 1 indicates that the uncertainty surrounding the supply chain of Google's self-developed AI chip—TPU (Tensor Processing Unit)—is dissipating, with expectations for explosive growth in production over the next two years. This may be an early signal that Google is preparing to sell TPU chips on a large scale to third parties.
Based on the latest investigations from the supply chain, the bank has significantly raised its production forecasts for Google TPU in 2027 and 2028. The forecast for 2027 has been raised from approximately 3 million units to about 5 million units, an increase of about 67%.
If Google starts an "external sales" model for TPU, it will open up a new and significant source of revenue. The report estimates that for every 500,000 TPU chips sold, Google could potentially add about $13 billion in revenue and $0.40 in earnings per share (EPS) in 2027.
Supply Chain Signals: Production Expectations to Double in 2027-2028
According to Morgan Stanley's Asian semiconductor analyst Charlie Chan, there have been clear signals of increased TPU orders from the supply chain. Based on this, Morgan Stanley has revised its future TPU supply estimates:
2027 TPU Production Forecast: Raised significantly from approximately 3 million units to about 5 million units, an increase of approximately 67%.
2028 TPU Production Forecast: Increased from approximately 3.2 million units to about 7 million units, with an astonishing increase of 120%.
The report points out that this means Google will obtain 12 million TPU units in just the two years from 2027 to 2028, compared to a total of only 7.9 million units over the past four years. The surge in production within two years indicates that Google's investment and layout in AI hardware are expanding at an unprecedented pace.
Supply Bottlenecks May Be Broken: Is Google's TPU External Sales Strategy Starting to Emerge?
Previously, a major concern in the market regarding whether Google would sell TPU externally was its supply capacity. Morgan Stanley had also listed "supply uncertainty" as a key constraint in its report.
However, the latest production forecast data may suggest that this "bottleneck may no longer be an issue." The report analyzes that although most of the additional TPU production may still be used for Google's own business and Google Cloud Platform (GCP) customers, such a large scale—12 million units in two years—"reveals the potential for Google to sell more TPUs through GCP and to sell them as independent products."
This is interpreted as Google possibly brewing a significant strategic shift: from the "self-produced and self-used" model of TPU to directly competing with AI chip giants in the market.
The production of 12 million TPUs over two years (compared to 7.9 million over the previous four years) indicates that Google has the potential to sell more TPUs through GCP and offer them as a first-party separate offering.
If this strategy is implemented, Google will transition from being a "consumer" and "service provider" of AI chips to a direct hardware "vendor," entering the high-profit AI chip market dominated by a few giants.
"Money Printing Machine" Potential: Each 500,000 TPUs Sold Could Increase Revenue by $13 Billion
For the market, the core question is: If Google really starts selling TPUs externally, how much financial return will this bring to the company?
Morgan Stanley provided an extremely enticing quantitative estimate in its report. The report clearly states that this potential strategy could have a significant financial impact on Google:
"The sale of every 500,000 TPU chips could add approximately $13 billion in revenue and $0.40 in earnings per share (EPS) for Google by 2027."
This data provides investors with a clear estimation model. If Google's TPU external sales strategy is implemented and succeeds, even selling a small portion of the production could contribute considerable revenue and profit growth for the company, potentially reshaping the market's valuation logic for Google and having a profound impact on the competitive landscape of the existing AI chip market.
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