Alphabet (GOOG) has a 23 percent upside run ahead, according to J.P. Morgan analyst Doug Anmuth, who raised his price target to $425 from current levels around $340.
The catalyst: Google Cloud revenue from Alphabet's homegrown Tensor Processing Units (TPUs). The company has used these custom AI chips internally for years but recently began selling them to external customers—a move that Anmuth sees as a major Google Cloud accelerant.
TPUs are optimized for AI agent workloads and specific model types, often outperforming general-purpose GPUs for those tasks. Google Cloud sales already jumped 82 percent to $24.8 billion in Q2 2026, driven by AI products and enterprise cloud services. Anmuth forecasts Google Cloud revenue could double in Q3 on the back of external TPU sales.
Alphabet CEO Sundar Pichai said in early 2026 that the company would begin delivering TPUs to a selected customer base for their own data centers. Demand is coming from AI labs, capital markets firms and high-performance computing shops—markets Alphabet had no direct access to before.
The timing is sharp. While GPU processor sales are expected to grow 16 percent year-over-year, custom processor sales are projected to rise 45 percent, according to TrendForce. Piper Sandler analyst Thomas Champion pegs Alphabet's processor sales at $104 billion by 2028—roughly equal to Alphabet's entire Q2 2026 revenue of $120 billion.
Alphabet's Q2 earnings hit $9.11 per share, up 294 percent year-over-year. The real test comes Oct. 28, when the company reports Q3 results and offers the first concrete read on external TPU demand.
One caveat: the broad AI spending arms race is real. Alphabet plans to deploy $200 billion in AI infrastructure capex, and that capital intensity across the sector is worth monitoring.
