Piper Sandler Projects Google's AI Chip Revenue to Hit $104 Billion by 2028

Alphabet's nascent external hardware business could generate $104 billion in annual revenue from its custom AI chips by 2028, according to a new forecast from Piper Sandler. Analyst Thomas Champion stated in a note that the market has not yet fully appreciated the revenue potential of Google's Tensor Processing Units (TPUs), a key component in the artificial intelligence infrastructure race.

A New Revenue Stream Comes Into Focus

The bullish projection follows Google's first-ever disclosure of external hardware sales in its second-quarter 2026 earnings report. This prompted Piper Sandler to formalize its financial model for the business, which it believes is on a steep growth trajectory.

The firm's model estimates a rapid ramp-up in TPU sales:

• 2026: Approximately $8 billion (from roughly 240,000 chips)
• 2027: Climbing to $51 billion (from 2.4 million chips)
• 2028: Reaching $104 billion

This forecast is based on a framework tied to data center facility and power capacity build-outs, assuming Google reaches 3 gigawatts of run-rate capacity by the end of 2027 and 6 gigawatts by the end of 2028.

Impact on Cloud Estimates and Valuation

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The projected TPU revenue significantly alters the outlook for Alphabet's Cloud division. Piper Sandler has raised its 2027 and 2028 Google Cloud revenue estimates to be 15% to 17% above the current Wall Street consensus, attributing the difference almost entirely to TPU sales. The firm now models $204 billion in total Cloud revenue for 2027, with $51 billion of that coming from TPUs.

Reflecting this outlook, Piper Sandler reiterated its Overweight rating on Alphabet (GOOGL) stock and raised its price target to $400 from $395. The firm also noted it expects a hardware operating margin of roughly 30% on TPU sales, in line with Google's existing business margins.

Context for Investors

Piper Sandler suggested that even its aggressive, "eye-popping" estimates may prove conservative. The note cited recent comments from Broadcom management indicating that demand from a single major AI player, Anthropic, could require 5 gigawatts of capacity in 2027 and 10 gigawatts in 2028. This level of demand could imply potential revenue far exceeding Piper Sandler's current base-case scenario.

Despite the positive analyst note, shares of Alphabet were trading down 0.7% in premarket hours on Sept. 28, 2026, amid broader weakness in the technology sector.