Alphabet Shares Rise Over 1% Pre-Market Ahead of Earnings as OpenAI TPU Plan Draws Focus

TradingKey - Google parent Alphabet (GOOGL) shares rose over 1% in pre-market trading. On one hand, market attention is focused on news that OpenAI may purchase Google's artificial intelligence chips; on the other hand, it is also awaiting Alphabet's upcoming third-quarter earnings report. As demand for AI computing power continues to grow, whether Alphabet can expand the customer base of its chip business and whether its cloud computing business can maintain strong growth momentum have become key focuses for investors.

Source: TradingView

According to people familiar with the matter, OpenAI is considering purchasing Google's Tensor Processing Units (TPUs), though the specific amount and other terms of the potential deal have not been disclosed. If the partnership is finalized, Google TPUs are expected to further penetrate the supply chain of large AI model developers, while also signaling that OpenAI continues to diversify its sources of computing power beyond Nvidia.

Meanwhile, competition in the custom AI chip market is heating up. Google provides TPUs to customers including Anthropic via Google Cloud and continues to expand the application scope of related services. In June this year, OpenAI unveiled its first custom AI chip co-designed with Broadcom and plans to deploy the processor before the end of the year as part of its multi-generational chip development plan. As big tech companies and AI firms increase investment in in-house chip development, the supply of computing power is gradually showing a trend toward diversification, drawing heightened market attention to the commercial progress of Google TPUs.

However, the market prospects generated by chip partnerships still need to be evaluated alongside Alphabet's overall financial performance. The company will report its third-quarter financial results after the U.S. market close on Wednesday. Investors will focus on the growth performance of its Search business, YouTube, and Google Cloud, while watching whether investment in AI infrastructure continues to increase.

According to market expectations, Alphabet's third-quarter revenue is expected to reach approximately $127.9 billion, representing a year-over-year increase of nearly 25%, with earnings per share expected at around $2.94. Among these, the performance of Google Cloud is particularly critical. The unit's second-quarter revenue surged 82% year-over-year, marking a strong growth rate. The market hopes to confirm from the latest earnings report whether AI demand can continue to drive cloud expansion and provide support for the company's long-term growth.

However, the rapid expansion of the cloud business comes with massive construction costs. Alphabet has raised its 2026 capital expenditure forecast to between $195 billion and $205 billion, with data centers, servers, networking equipment, and power infrastructure being the main areas of investment. Investors need to confirm whether the growth of revenue from cloud computing and AI can gradually catch up with capital expenditures, while avoiding persistent compression of free cash flow caused by depreciation and operating costs.