Google and Amazon Just Launched a Full-Frontal Assault Against Nvidia
Google and Amazon are intensifying competition against Nvidia in the AI chip market. Google is financing a data center project to showcase its TPUs, while Amazon plans to sell its custom Trainium3 and Inferentia2 chips directly to third parties. Despite this rivalry, Nvidia remains dominant with an 85-92% market share and strong financial growth, leading analysts to maintain a 'buy' rating on its stock.
Nvidia's (NVDA 0.85%) rise to superstardom in the artificial intelligence (AI) chip space has been nothing short of spectacular. The company pivoted from its focus on gaming chips and adapted its graphics processing units (GPUs) to handle the rigors of AI. Nvidia's processors quickly became the gold standard, currently controlling between 85% and 92% of the data center GPU market.
A market share of that magnitude would inevitably attract attention, with rivals scrambling to get their piece of the resulting windfall. There has been much ink spilled about the growing competition, but alternative AI processing options haven't made a dent in Nvidia's dominance.
That could be about to change, as reports detail the steps two of Nvidia's biggest rivals have taken to encroach on the chipmaker's turf.
Image source: The Motley Fool.
Alphabet's big bet
Alphabet (GOOGL 5.67%) (GOOG 5.68%) first staked a claim in the AI chip space more than a decade ago, developing custom Tensor Processing Units (TPUs) for internal use. Earlier this year, the Google-parent unveiled the eighth generation of these chips, releasing the TPU 8t and the TPU 8i, for AI training and inference, respectively.
The company's latest gambit is a clear illustration of its strategy to capture some of Nvidia's market share. Google sponsored a massive project spearheaded by TeraWulf(WULF 2.62%) to pivot its Lake Mariner data center from crypto mining to AI and high-performance computing (HPC). Google has provided $3.2 billion in financing and taken a 14% stake in the company.
NASDAQ: GOOGL
Key Data Points
The data center will feature thousands of Google TPUs for AI processing, according to The Wall Street Journal, with AI start-up Anthropic signed on to lease much of the resulting compute capacity.
By sponsoring the project, Google plans to showcase the ability of these chips to compete directly against Nvidia's GPUs. Google has previously said it will sell its TPUs directly to "select" customers, so this is another example of the company’s moves to take on Nvidia.
Amazon's latest move
Amazon (AMZN 4.45%) also has a long history of developing AI-capable chips for its cloud segment, Amazon Web Services (AWS). The company's latest generation Trainium3 and Inferentia2 chips were designed for AI training and inference, respectively.
In the company's 2025 shareholder letter, CEO Andy Jassey divulged plans to enter the market, saying, "There's so much demand for our chips that it's quite possible we'll sell racks of them to third parties in the future." Looks like those plans are coming to fruition.
NASDAQ: AMZN
Key Data Points
Amazon has announced plans to sell its custom AI chips directly to customers, according to a Bloomberg report. The company's AI chief, Peter DeSantis, confirmed that discussions had begun, but declined to identify the customers in question.
Until now, Amazon has limited use of its AI chips to AWS cloud customers, so this marks the next logical step in the company’s plans to compete with Nvidia.
Should Nvidia investors be worried?
Even as competition intensifies, Nvidia's revenue continues to accelerate, driven by the ongoing expansion of the AI market -- meaning the market is large enough for more than one winner.
In the company's fiscal 2027 first quarter (ended April 26), Nvidia's revenue of $81.6 billion grew 85% year over year, while its diluted earnings per share (EPS) of $2.39 soared 214%. Furthermore, management is guiding for revenue growth of 95% in Q2, which shows that its growth is still accelerating.
NASDAQ: NVDA
Key Data Points
Investors have become so accustomed to Nvidia's outperformance that it's easy to forget just how dominant it is in the space.
To be clear, the competition is coming, and Nvidia won't be able to keep up its high double-digit year-over-year growth indefinitely. That said, the adoption of AI is still in the early stages, and Nvidia is the leading provider of AI-centric chips -- and I don't expect that to change anytime soon.
And at 23 times forward sales, Nvidia is cheaper than either of its erstwhile rivals, with Alphabet and Amazon stocks selling for 24 and 27 times forward sales, respectively.
That's why Nvidia stock is a buy.
