Google TPUs Are 'Cost-Effective Hedge,' Not Replacement For Nvidia, Strategist Says

Despite reports of Meta Platforms Inc. (NASDAQ:META) possibly shifting billions in AI hardware spending to Alphabet Inc.‘s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google’s TPUs, one market strategist argues the move is a defensive tactic against supply shortages, not a sign of Nvidia Corp.‘s (NASDAQ:NVDA) ending dominance.

Expect ‘A Bear Story A Day’

James E. Thorne, Chief Market Strategist at Wellington-Altus Private Wealth, dismissed the subsequent drop in Nvidia shares as a typical “bearish hit” in an overheated market.

“In today’s market a Bear story a day should be expected,” Thorne wrote in a post on X on Tuesday.

However, Thorne contends the market is misinterpreting the move. He argues that hyperscalers like Meta are turning to Google’s TPUs as a “cost-effective hedge” because Nvidia’s cutting-edge Blackwell and Rubin GPUs face “long lead times and tight supply.”

Thorne emphasized that while TPUs offer capacity leverage, they are “not a universal replacement” for Nvidia’s ecosystem. He pointed to “HIGH switching costs and software friction” involved in moving away from Nvidia's pervasive CUDA software platform as a major barrier to a “wholesale shift” in the industry.

NVDA Is A ‘Generation Ahead,’ But ‘Delighted’ For Google

The reaction follows reports that Meta is negotiating to use Google's Tensor Processing Units (TPUs) in its data centers as soon as next year. The news sent Nvidia shares down 2.59% on Tuesday, as investors feared its grip on the AI infrastructure market was slipping.

Nvidia publicly responded to the Google reports on Tuesday by stating it was “delighted by Google’s success” but simultaneously asserting its own hardware remains “a generation ahead” and more versatile than specialized chips like TPUs.

Benzinga has reached out to Google for comment on Thorne’s analysis and the competitive landscape, but has not yet received a response.

What Do Edge Rankings Say About GOOG And NVDA?

NVDA shares have advanced by 32.41% year-to-date and 30.73% over the year.

Benzinga’s Edge Stock Rankings indicate that it maintains a weaker price trend over the short and medium terms but a strong trend in the long term, with a solid quality ranking. Additional performance details are available here.

Meanwhile, Alphabet has gained 69.94% YTD and 91.02% over the year.

GOOG maintained a stronger price trend over the short, long, and medium terms, with a strong growth ranking. Additional performance details, as per Benzinga’s Edge Stock Rankings, are available here.