TPU external sales open up new space; BNP Paribas raises Alphabet Inc. Class C (GOOGL.US) target price to $450, implying 28% upside.

BNP Paribas raised its target price for Alphabet Inc. Class C (GOOGL.US) from $420 to $450, citing the revenue potential from external sales of its self-developed AI chip, the Tensor Processing Unit (TPU). The $450 target price proposed by BNP Paribas is based on a 26.5x P/E multiple applied to its 2028 EPS estimate of $17; the previous valuation methodology was a 30x P/E multiple on a 2027 EPS estimate of $13.85. Based on Alphabet's Tuesday closing price of $351.40, the new target price implies 28% upside. The brokerage estimates that, based on disclosed procurement commitments from customers such as Anthropic and Blackstone, external TPU sales could generate cumulative revenue of $80 billion to $100 billion by 2028. BNP Paribas said Alphabet has already locked in more than 5 gigawatts (GW) of confirmed TPU capacity commitments, with most deliveries expected to begin in 2027. The bank expects TPU revenue to exceed $4 billion in 2026, surpass $40 billion in 2027, and reach $30 billion in 2028. BNP Paribas expects TPU sales to significantly increase absolute operating profit, but to weigh on Alphabet Inc. Class C Cloud's operating margin in the near to medium term. The bank estimates margin dilution of about 115 basis points in 2027 and more than 50 basis points in 2028. BNP Paribas also noted that supply chain constraints could affect the timing of sales, while limited public information on TPU economics also creates uncertainty about its impact on profits.