Google's merchant TPU sales: a 2028 revenue line most models still miss

Alphabet has long used its Tensor Processing Units internally to power its own AI workloads, and selling those chips as a merchant product to outside buyers repositions the company in a fundamentally different market. That move puts it in direct competition with established merchant silicon providers.

Analyst Beth Kindig flagged that merchant TPU sales are expected to follow a rapid growth trajectory through 2028, while noting that analysts broadly remain skeptical or have not yet priced the opportunity into their models. Surprises tend to emerge in that gap.

The distinction between cloud vendor and merchant chip supplier matters for valuation, because cloud revenue is priced on recurring service margins while merchant chip businesses command entirely different multiples tied to unit volumes and design wins. Investors using standard Alphabet models are looking at an incomplete picture of where hardware revenue is heading.

With a growth window extending to 2028, the timeline is long enough that the opportunity is easy to defer. But if merchant TPU adoption accelerates faster than the skeptical consensus expects, the models that ignored this line will need to be rebuilt quickly.