Alphabet Inc. (GOOGL) shares edged lower on Thursday, falling approximately 1% to $352.50, as the stock bucked a broader market rebound. The decline came amid reports that Google is in discussions with Samsung Electronics to manufacture a portion of its next-generation artificial intelligence chip, raising questions about the company's hardware strategy and capital expenditure outlook.
The move left Alphabet underperforming the wider market, with the Dow Jones Industrial Average up 0.54%, the S&P 500 gaining 0.26%, and the Nasdaq Composite rising 0.41% in late morning trading. Alphabet's Class C shares also fell, last trading at $349.74, down 1.0%, as the company's market capitalization remained above $4.2 trillion.
According to a report from Reuters, citing The Information, Google is in talks with Samsung about building part of its next-generation tensor processing unit, codenamed "Icefish." TSMC is expected to manufacture the main compute component, while Samsung could handle other portions. The chip is still in development with MediaTek and may not reach mass production until 2028 at the earliest. Alphabet has not commented on the report, and Samsung declined to respond.
The news comes as Google explores diversifying its chip supply chain, with a separate report indicating the company has also held discussions with Intel about producing over three million TPUs in 2028. For Alphabet shareholders, the sourcing of these chips is critical as the company aims to expand its cloud business and reduce reliance on Nvidia GPUs.
The broader communication-services sector lagged on Thursday, falling 1.8%, with both Alphabet and Meta Platforms declining nearly 2%. Semiconductor stocks, however, rebounded from the previous session's selloff, with Intel, Nvidia, and Micron all trading higher. The divergence highlights ongoing investor unease about high valuations in megacap technology names amid a choppy market environment.
Oracle shares also fell after the company disclosed fiscal 2027 capital spending plans that exceeded Wall Street forecasts, adding to concerns about the costs of AI infrastructure buildout. Investors remain focused on how much major tech players need to invest to maintain competitiveness in the AI race.
Alphabet's business spans Google Services, including Search, YouTube, Android, and Google Maps, as well as Google Cloud, which offers AI infrastructure, Vertex AI, Gemini for Google Cloud, and cybersecurity products. The company's exposure to both advertising and AI infrastructure makes it a bellwether for the sector's spending trends.
Thursday's decline leaves Alphabet shares caught between optimism about its AI chip ambitions and anxiety over elevated price levels in large-cap tech. The stock was among the weakest performers in the Big Tech cohort, with volume near 20.2 million shares traded.
