The Zhitong Finance App learned that BNP Paribas raised the target price of Google Alphabet (GOOGL.US) from $420 to $450 on the grounds that it may generate revenue potential from overseas sales of its self-developed AI chip tensor processing unit (TPU).
The target price of 450 US dollars proposed by France and Pakistan is based on its 2028 earnings per share (EPS) estimate of 26.5 times the price-earnings ratio of 17 US dollars; the previous valuation method was 30 times the price-earnings ratio estimated by EPS of 13.85 US dollars in 2027. Based on Alphabet's closing price of $351.40 on Tuesday, the new target price means 28% room for growth.
The brokerage firm estimates that based on procurement commitments already disclosed by customers such as Anthropic and Blackstone (Blackstone), TPU's foreign sales may bring in cumulative revenue of 80 billion to 100 billion US dollars by 2028.
According to France and Pakistan, Alphabet has secured more than 5 gigawatts (GW) of confirmed TPU production capacity commitments, and most of these deliveries are expected to begin in 2027. The bank expects TPU revenue to exceed US$4 billion in 2026, US$40 billion in 2027, and US$30 billion in 2028.
France and Pakistan expect that TPU sales will significantly increase the absolute amount of operating profit, but it will drag down Google Cloud's operating profit margin in the near to medium term. The bank estimates that the profit margin dilution in 2027 is about 115 basis points, and in 2028 it exceeds 50 basis points.
France and Pakistan also pointed out that supply chain restrictions may affect sales schedules; however, limited public information on the economics of TPU also makes its impact on profits uncertain.