Meta stock (NASDAQ: META) jumped around 3% on Tuesday after reports emerged that it’s negotiating a multibillion-dollar deal to rent and eventually purchase Google’s Tensor Processing Units (TPUs) for its data centers.
The company could start leasing TPU capacity from Google Cloud in 2026, with full deployment in company-owned data centers by 2027.
The market’s 3% response signals relief, but Wall Street is missing the bigger picture.
For a company spending $70–72 billion annually on AI infrastructure, chip diversification represents a structural shift that could unlock billions in margin expansion.
Meta stock: How TPU deal actually lowers capex and boosts profitability
Here’s what most investors got wrong on Tuesday: this deal isn’t about “having options.”
It’s about money flowing straight to the bottom line. Google is positioning TPUs as 15–30% faster than traditional CPUs and significantly more energy-efficient than Nvidia GPUs for specific AI workloads, particularly inference tasks.
For Meta, that translates to tangible cost reductions.
Bloomberg Intelligence estimates Meta could spend $40–50 billion on inference chip capacity alone in 2026.
If Meta shifts just 10–15% of that spending to cheaper, more efficient TPUs, that’s $4–7 billion in direct capex savings per year.
Over four years, that compounds to $16–28 billion in freed-up capital. That capital doesn’t disappear; it flows into margin-accretive initiatives, R&D acceleration, or shareholder returns.
Wall Street’s current Meta valuation at 27.73x P/E assumes capex pressure persists indefinitely.
If TPU adoption actually materializes at scale by 2027, profitability jumps materially. The Tuesday rally barely scratched the surface of what’s priced in.
Why Nvidia’s collapse is Meta’s biggest opportunity
When Nvidia dropped 4.13% on the same news, it exposed something crucial: investor fear that Nvidia’s GPU monopoly pricing power is cracking.
Meta’s public move toward TPU diversification gives other hyperscalers like Microsoft and Amazon permission to do the same.
This triggers a competitive cascade. Once pricing power erodes, Nvidia’s margin expansion assumptions collapse.
The dynamic creates a widening valuation gap. Nvidia trades at 43.32x P/E, assuming sustained pricing dominance; Meta trades at 27.73x, assuming chip costs compress.
If Nvidia actually gets forced into margin compression while Meta’s margins expand from TPU adoption, the relative rerating could be brutal for Nvidia and explosive for Meta.
The Tuesday move was purely the TPU deal announcement moving the needle.
The real inflection happens in Q1 2026 when earnings calls reveal actual TPU deployments gaining traction and margin expansion beginning in real time.
Once that proof point hits, the 3% move today looks like the opening act of a much longer rally.
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