Omdia: Demand for Google's TPU chips accelerates challenging NVIDIA's dominance

Rhea-AI Summary

Google's Tensor Processing Unit (TPU) AI chips are experiencing rapid growth in demand, potentially challenging NVIDIA's GPU market dominance. According to Omdia's research, based on Broadcom's Semiconductor Solutions division data, Google's TPU purchases could range between $6 billion to $9 billion this year. Broadcom, which serves as a custom chip outsourcing partner for Google, Meta, and other AI players, has revised its AI semiconductor revenue target to $12 billion for the year.

The growth in TPU shipments appears significant enough to potentially reduce NVIDIA's market share for the first time. Google Cloud Platform's increasing revenue share and improving profitability might indicate that TPU-accelerated instances and AI products are driving this growth, particularly given that accelerator instance types are high-margin products.

Positive

• TPU shipments estimated at $6-9 billion, indicating strong market penetration
• Google Cloud Platform showing revenue growth and improved profitability
• High-margin TPU-accelerated instance types driving cloud business growth

Negative

• None.

Insights

Technology Market Analyst

The surge in Google's TPU demand represents a significant shift in the AI chip market landscape. At $6-9 billion in estimated revenue through Broadcom's semiconductor division, this indicates substantial market penetration. The TPU growth trajectory could mark the first meaningful challenge to NVIDIA's AI chip dominance, particularly in cloud computing applications.

Broadcom's repeated upward revisions of AI semiconductor revenue targets to $12 billion reflect robust demand and potential supply constraints. Google Cloud's improving profitability metrics, coupled with its growing revenue share, suggest strong commercial validation of TPU technology. This development could reshape competitive dynamics in the AI chip market, potentially leading to price pressures and accelerated innovation cycles.

Financial Analyst

This development has significant implications for multiple players in the semiconductor space. For NVIDIA, while their market position remains strong, the emergence of viable competition could impact their pricing power and margins in the AI chip segment. For Broadcom, the expanding AI chip business represents a major growth driver, with the potential for sustained high-margin revenue streams from multiple major tech clients.

Google's vertical integration strategy in AI infrastructure could translate to improved cost efficiency and margins for their cloud services. With a third major client expected to join in 2025, Broadcom's semiconductor solutions division is positioned for continued growth. Investors should monitor market share dynamics and margin trends in the coming quarters as competition intensifies.

LONDON, Dec. 18, 2024 /PRNewswire/ -- Omdia's latest research highlights the rapid growth in demand for Google's Tensor Processing Unit (TPU) AI chips, a trend that may be strong enough to start chipping away at NVIDIA's market dominance in GPUs. 3Q results from Broadcom, whose Semiconductor Solutions division acts as a custom chip outsourcing partner for Google, Meta, and several other AI players, give our analysts some insight into purchasing trends and information that is typically kept under wraps – how many custom processors is Google buying?

Broadcom's CEO Hock Tan has repeatedly revised up his target for AI semiconductor revenue, aiming for $12bn for this year. Based on this, it is estimated that Google's TPUs could account for somewhere between $6bn – close to Omdia's existing estimates - and $9bn, depending on the breakdown between compute and networking devices. This figure includes a substantial number of Meta's MTIA chips, with a project for a mysterious third client expected to ramp up in 2025.

Alexander Harrowell, Principal Analyst at Omdia noted: "Even though there is some uncertainty in the exact ratio between compute and networking devices, shipments of TPUs, even at the lower $6bn estimate, are growing at a pace fast enough to take share from NVIDIA for the first time. It's worth noting that Google's Cloud Platform business continues to grow as a share of Google's revenue while improving profitability. This could indicate that TPU-accelerated instance types or AI products running on TPUs are driving the growth at Google Cloud, especially as accelerator instance types are high-margin products."

ABOUT OMDIA
Omdia, part of Informa TechTarget, Inc. (Nasdaq: TTGT), is a technology research and advisory group. Our deep knowledge of tech markets combined with our actionable insights empower organizations to make smart growth decisions.

Contact
Fasiha Khan: fasiha.khan@omdia.com

 

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SOURCE Omdia

FAQ

What is the estimated value of Google's TPU chip purchases in 2024?

According to Omdia's research, Google's TPU purchases are estimated to be between $6 billion and $9 billion in 2024, based on Broadcom's semiconductor revenue targets.

How are Google's TPU chips affecting NVIDIA's market dominance?

The rapid growth in TPU shipments is significant enough to potentially reduce NVIDIA's market share for the first time, challenging their GPU market dominance.

What is Broadcom's AI semiconductor revenue target for 2024?

Broadcom's CEO Hock Tan has set an AI semiconductor revenue target of $12 billion for 2024.

How are TPUs contributing to Google Cloud Platform's growth?

TPU-accelerated instance types and AI products running on TPUs are driving growth at Google Cloud Platform, with these high-margin products contributing to improved profitability.