Why Morgan Stanley Just Got More Bullish on Alphabet (GOOGL) Stock
TLDR
- Morgan Stanley says Google could generate $200B in revenue from its custom TPU chips over the next few years
- Analyst Brian Nowak raised TPU price estimates to $27bn/GW with a 30% gross margin, up from $20bn/GW at 20%
- Morgan Stanley projects $84bn and $108bn in TPU-related Google Cloud revenue in 2027 and 2028
- GOOGL carries an average analyst rating of “Buy” with a consensus price target of $420.19
- Institutional investors including Vanguard and Norges Bank have been adding to their GOOGL positions
Alphabet’s (GOOGL) stock opened at $348.06 on Tuesday and ticked up around 0.9% in early trading after Morgan Stanley raised its outlook on the company’s custom chip business.
Morgan Stanley analyst Brian Nowak said Google could generate around $200 billion in revenue tied to its tensor processing units (TPUs) over the coming years. That’s a big number, and Nowak laid out exactly how he got there.
The key update is pricing. Nowak raised his TPU selling price estimate to $27bn per gigawatt, up from a previous assumption of $20bn/GW. He also lifted his gross margin assumption to 30%, from 20%.
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