Alphabet and Anthropic's Partnership Could Be a Major Boost

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is one of the most prominent figures in artificial intelligence (AI). It has a leading AI model, Gemini, that it developed itself, but it's also supporting other AI models with its computing infrastructure. One major piece of that is its custom AI processing unit, the Tensor Processing Unit (TPU). The performance and potential of this chip, designed in collaboration with Broadcom, are major reasons why Alphabet's stock is a solid investment option right now.

One company benefiting from Alphabet's TPUs is Anthropic. Anthropic's Claude AI is one of the most popular large language models available. Anthropic uses three different computing chips to train its models, including TPUs.

Anthropic and Alphabet recently announced a partnership that could drive it closer to Alphabet and boost both companies' returns.

Image source: Getty Images.

Is Alphabet helping the competition?

It may seem odd for Alphabet to assist a competitor by providing proprietary computing units that have gained a reputation for being highly cost-effective. But that's the wrong way of looking at it. Alphabet is trying to ensure it can cash in on the AI arms race. It could do this by building the best generative AI model available. It could also do it by providing potential winning computing units, locking competitors into its ecosystem for the foreseeable future. Either way provides Alphabet's shareholders a massive win. By spreading out its bets to several areas, Alphabet also increases its odds of long-term success.

Back in April, Anthropic and Alphabet announced a deal where Alphabet would provide Anthropic with "multiple gigawatts of next-generation TPUs." That's a big deal, but it isn't the only computing unit that Anthropic uses. Anthropic also trains its model on Nvidia GPUs and Amazon's custom Trainium chip. A continued Anthropic partnership is a good thing for Alphabet, but it doesn't mean the company has completely won the AI chip competition.

Still, this could boost Alphabet's cloud computing business. In the first quarter, Google Cloud's revenue rose 63% year over year. While that's impressive, part of the boost was thanks to TPU sales being accounted for in that business unit. Additionally, knowing that a leader like Anthropic uses TPUs may also inspire other companies to run their workloads on TPUs, which are only available for use through Google Cloud, unless you're a major AI player.

Anthropic and Alphabet's partnership is a great thing for both companies, but it especially validates the prowess of TPUs. This will be a great boost for Alphabet, and it's just another reason why it's a top AI pick.

Keithen Drury has positions in Alphabet, Amazon, Broadcom, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, and Nvidia. The Motley Fool has a disclosure policy.