LIVE MARKETS-Meta’s chip buying a boost for Google, but Meta itself could be the bigger winner

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META’S CHIP BUYING A BOOST FOR GOOGLE, BUT META ITSELF COULD BE THE BIGGER WINNER

Morgan Stanley estimates that while Alphabet is set for a revenue boost from selling Google's tensor processing units (TPUs) to Meta Platforms, the latter can use it as a way to cut its longer-term capital expenses.

The Information reported on Tuesday that Meta META.O was in talks to spend billions of dollars on Google's chips, a development which drove Alphabet GOOGL.O to an intraday record high.

The brokerage estimates that every 500,000 TPUs sold to external customers could translate into $13 billion or about 11% upside to MS' estimates for Google Cloud Revenue estimates, and about 37 cents to its profit per share.

Still, Meta may ultimately have the greater benefit. Running its workload through Google's TPUs could potentially offset part of its capital expenditure in 2027, thanks to the chips' strong cost performance ratio, says MS.

Instagram parent Meta forecast "notably larger" capital expenses next year in its quarterly earnings report in October.

However, MS does not see Meta's use of TPUs having a material impact its bullish view on AI bellwether NvidiaNVDA.O , despite the narrative headwind, as AI spending continues to rise across the board.

(Anastasiia Kozlova, Purvi Agarwal)

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