Google 'has a lot to prove' with chip announcement: Strategist

At the Cloud Next conference in Las Vegas, Google (GOOG, GOOGL) and Intel (INTC) each introduced new chips. Google's Axion is a custom Arm-based server chip and Intel's Gaudi 3 is an AI chip designed to take on Nvidia's (NVDA) most popular AI processors.

Moor Insights & Strategies founder and CEO Patrick Moorhead joins Market Domination to give insight into the booming chip sector and how these announcements will impact the market.

Speaking on Google's announcement and position in AI sector, Moorhead states, "Google has a lot to prove. I don't think anybody is questioning the company's technical competency. In fact, they wrote the groundbreaking research paper on generative AI and I think what people are questioning is, can they extend what they do in consumer search to the generative AI world? And then I think even more difficult, extending it to the commercial market, which is what the conference I'm at right now it is all about and they've had some stumbles. Every major announcement that they've made has come with some baggage."

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Editor's note: This article was written by Nicholas Jacobino

Video transcript

JOSH LIPTON: Big tech making big news this week at its annual cloud computing conference in Las Vegas. Google introducing a new chip called Axion, a custom-built Arm-based server chip. And meanwhile, Intel debuting a new AI chip called Gaudi 3 designed to take on Nvidia's most popular AI processors.

Here to help us break down what this all means for investors, exactly the man we need to talk to, Patrick Moorhead, founder and CEO of Moor Insights & Strategy. Patrick, it is great to have you on the show. Let's start with Google here, Patrick, and this new chip called Axion. Just high level, Patrick, walk our viewers just through this chip. What are the tasks this processor is best suited for?

PATRICK MOORHEAD: Yeah. So this new Axion processor is a general-purpose CPU, meaning it should be able to do a wide variety of tasks, from databases to even light AI processing to web serving and everything in between. It really is the workhorse of the data center. Even with all of this AI conversation, which is important, you still need a very capable CPU to get the job done.

JULIE HYMAN: And how quickly can the CPU get up and running? And what are the implications then for chip companies, for other chip designers and for Google supply chain?

PATRICK MOORHEAD: Yeah. Google disclosed that they're already using this new chip for some internal workloads, and then for enterprises through Google Cloud will be available later on in the year. And this really is just another proof point that of cloud providers, like Google Cloud, Amazon, as well as Microsoft, who are doing their own chips.

And this does pose a threat for the Intels and the AMDs of the world, but I do believe that the market is big enough for all of them. Now, every one of these custom Arm-based processors that gets sold is one less chip that AMD and Intel can sell. So, there will be a mark left. It's just inconclusive of how big that will be.

JOSH LIPTON: And Patrick, kind of a broader question to you also, because there are some investors who've been skeptical, Patrick, about Google's AI efforts and strategy. Are you skeptical, Patrick, or no, do you believe that Google is well positioned in this new era of AI?

PATRICK MOORHEAD: Google has a lot to prove. I don't think anybody's questioning the company's technical competency. In fact, they wrote the groundbreaking research paper on generative AI. And I think what people are questioning is, can they extend what they do in consumer-- let's say, search-- to the generative AI world?

And then I think even more difficult, extending it to the commercial market, which is what the conference I'm at right now is all about. And they've had some stumbles. I mean, every major announcement that they've made has come with some baggage.

And I'd like to see the company have one major announcement where there wasn't a major issue until I can get confidence that the company can do this. I think the good news is that Google Search is a stalwart here. YouTube and its ad business based around all of those businesses is strong, but they need a major win without any issues to really put their future in concrete.