Google’s (NASDAQ:GOOG)(NASDAQ:GOOGL) freshly inked deal to supply Anthropic (ANTHRO) with up to 1M of its in-house Ironwood TPUs for artificial intelligence applications opens the door for more such agreements in the future, according to HSBC.
The fact that the TPUs are produced by Google should also increase margins, the bank said.
“The chips are in-house inference chips, so we expect the rental of them to be higher margin than chips bought in from external sources,” said HSBC analyst Paul Rossington in an investor note.
“Alphabet is the only western Cloud Service Provider that has managed to get the latest version of its in-house chip into production in 2025, with Microsoft’s (MSFT) project Braga and Amazon’s (AMZN) Trainium3 chip delayed into 2026,” Rossington said. “We expect this to be a part of the reason for the deal and suggest further upside potential through Ironwood leases to other clients.”
HSBC noted that Amazon has a 20% stake in Anthropic, while Google holds about 14%. The bank expects Anthropic to utilize a multi-cloud strategy.
“We assume that the rental cost for a TPU on a 3-year commitment is USD1.50-2.00/hour, and so for 1GW of capacity reach revenues of USD13.1-17.5bn,” Rossington added. “We assume USD15bn and of which 1/3 of this was already in our growth forecasts. We therefore lift our FY26e Google Cloud revenue forecasts by USD10bn or +13.5%.”
HSBC reiterated its Buy rating on Google and increased its target price to $295 from $285.
As part of the deal, Anthropic said it plans to use up to 1M TPUs and “dramatically” increase its compute resources. Anthropic said the expansion of the deal was worth “tens of billions of dollars” and is expected to bring well over a gigawatt of capacity online in 2026.
Google shares edged up 2% during Friday market action.