Alphabet launches two new AI chips to rival Nvidia amid Jensen Huang scandal

Sundar Pichai’s Alphabet (GOOGL) has launched two more AI chips to compete with Nvidia (NVDA), and the announcement comes at a rather uncomfortable time for Jensen Huang.

Google introduced its latest processors Monday, just as Nvidia faces an investigation involving its CEO’s admitted affair and allegations that he may have been targeted by Chinese intelligence.

Alphabet shares rose more than 2% in premarket trading, despite having fallen 9% this year through the previous close. The new processors, named 8tx and 8i Max, are modified versions of Google’s existing Tensor Processing Units, better known as TPUs.

Alphabet wants more of Nvidia’s AI chip business

Google has been developing its own chips for use in products such as Search, YouTube, and Gemini for many years. As opposed to Nvidia, which manufactures graphic processing units for use in the entire tech industry, Google kept much of its TPU technology within the company.

This model is changing.

Alphabet now provides TPU computing via Google Cloud, where external firms can utilize Google’s chips for running AI workloads without purchasing Nvidia’s chips.

And customers are spending money.

Alphabet said TPU sales made a meaningful contribution to its September-quarter results, with Google Cloud revenue more than doubling to $30.71 billion.

The 8tx chip has been developed to protect companies that cannot risk revealing the information that will be processed on the computers. This group consists of government departments, banks, and any other company with very strict data protection regulations.

Google has teamed up with chip makers at Advanced Micro Devices (AMD), integrating encryption into the hardware itself.

Ordinarily, protecting information during processing can consume computing resources. Google says its new design delivers up to twice the speed of the previous generation, with virtually no performance penalty.

8i Max is meant for an entirely different purpose since rather than mainly concentrating on security, Google has merged two chips to create more storage space and processing power for artificial intelligence.

Google specifically pinpointed software coding assistants, mathematical reasoning, and drug discovery as tasks that could be optimized by the design. For Nvidia, the bigger issue is that Alphabet is giving enterprise customers more alternatives to its GPUs, particularly those already paying Google for cloud infrastructure.

Jensen Huang’s scandal raises uncomfortable questions at Nvidia

Nvidia’s NVDA has crashed by around 6% amid speculation relating to Jensen’s admitted infidelity and espionage worries involving China, amounting to $250 billion being erased from the company’s market value.

Jensen has a personal stake of about 3.5% of Nvidia, which means that the sell-off has wiped billions of dollars off the value of his shares.

Nvidia is the second most valuable publicly-traded company in the world, right after Apple (AAPL), but before Microsoft (MSFT), Alphabet, and Amazon (AMZN).

However, it is not just the direct owners of Nvidia that have lost money. Pension funds, retirement accounts, and other savings vehicles might be invested through indexes.

Jensen acknowledged his affair with his wife Lori Mills in a statement circulated among Nvidia employees. He told staff:

“There is no excuse for what I did. I am deeply sorry. I am committed to protecting Nvidia and supporting America’s national security. I am proud and grateful to be an American,” Jensen added.

Nvidia maintains that it has no reason to believe company secrets or American national security were compromised. Its investigation is expected to examine those questions rather than treat the espionage allegations as established facts.

Trump, in response to questions regarding Jensen, stated that he was a “good guy,” although “you never know what’s going on.”

Secretary of State Marco Rubio offered considerably less, saying he “just can’t comment.”

China’s Foreign Ministry dismissed the accusations, calling them “groundless speculation” and “nothing more than an attempt to smear China.”

Another question hanging over Nvidia is whether the investigation could eventually affect Jensen’s leadership.

There is currently no indication that Jensen intends to resign.

During a recent Bloomberg interview, Jensen said he hoped to remain at Nvidia for another 20 years, although he believed his eventual successor might already be working for the company.

His family certainly has a presence there.

Jensen’s daughter Madison, son Spencer and son-in-law Nico Caprez all work at Nvidia, raising questions about whether succession could eventually involve someone from the family.

But Jensen pushed back when Bloomberg asked whether Madison might inherit the top job.

“I don’t hope the job on her,” Jensen said, explaining that his children “would have to go earn it.”

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