Google's demand for its self-developed artificial intelligence (AI) chips is surging, creating cracks in Nvidia's dominance in the AI semiconductor market. As the 'de-Nvidia' movement among big tech corporations accelerates, evaluations suggest that Nvidia's market dominance is gradually weakening.
According to market research firm Omdia on the 30th, Google's AI chip Tensor Processing Unit (TPU) is expected to generate sales between $6 billion and $9 billion (approximately 8.8 trillion won to 13.2 trillion won) this year. The TPU is a custom chip designed by Google for AI operations (specialized chips for machine learning and inference). In comparison to Nvidia's estimated AI chip sales of over $80 billion (approximately 117.74 trillion won), Google's figures are still only about one-tenth.
Alexander Howel, a senior researcher at Omdia, noted, "The demand for Google TPUs is growing rapidly enough to take market share from Nvidia," adding that even if the TPU shipment sales are at the expected minimum of $6 billion, it will have a significant impact on the AI chip market share dominated by Nvidia.
The high demand for Google's AI chips stems from the concerns of big tech corporations seeking to improve cost efficiency. Notably, global cloud service providers such as Microsoft, Alphabet, Amazon, and Meta have begun to prefer custom AI chips (ASICs) that offer higher power efficiency than Nvidia's GPUs. Until now, big tech corporations that have purchased Nvidia AI chips in bulk for AI development have referred to the high operational costs of Nvidia chips as the 'Nvidia tax.' As expenses have increased, big tech firms are seeking to develop their own AI chips or find alternatives.
Apple has also used Google chips instead of Nvidia chips for AI model training. In a paper released in July, Apple stated that the AI model underlying its AI system "Apple Intelligence" was trained on a Google TPU cluster. In line with this trend, U.S. investment bank Morgan Stanley predicted that the growth rate of the custom AI chip market led by cloud service providers would surpass that of the GPU market. The custom AI chip market size is expected to grow from $120 billion (approximately 176.5 trillion won) this year to $300 billion (approximately 441.2 trillion won) by 2027.
Fueled by demand for Google TPUs, the Google Cloud Platform business is also thriving. In the third quarter of this year, revenue from the Google Cloud Platform segment reached $11.4 billion (approximately 16.7 trillion won), a 35% increase from the same period last year. This accounts for about 13% of Alphabet's total revenue ($88.3 billion), a figure that has been steadily rising. During the same period, the operating profit of the Google Cloud Platform segment surged 627% year-on-year to $1.938 billion (approximately 2.8 trillion won), with an operating profit margin of 17%. Howel remarked, "The ultra-high-speed data processing service and AI products utilizing TPUs are key drivers of Google Cloud's growth," adding that the TPU-based ultra-high-speed data processing service is highly profitable and is expected to drive Google Cloud's performance in the future.