BNP Paribas raised its Alphabet price target to $450, citing its outlook on TPU.

BNP Paribas raised its price target on Alphabet (GOOGL) to $450 from $420, citing potential revenue from sales of its tensor processing units (TPUs), the company's in-house AI chips.

The brokerage's $450 target is based on 26.5 times its estimated 2028 earnings per share of $17. Its previous valuation approach was 30 times its 2027 EPS estimate of $13.85. The new target implies 28% upside from Alphabet's Tuesday price of $351.40.

BNP Paribas estimates that external TPU sales could generate $80 billion to $100 billion in cumulative revenue through 2028, based on reported commitments from customers including Anthropic and Blackstone.

Alphabet has secured more than 5 gigawatts of identifiable TPU capacity commitments, with most deliveries expected to begin in 2027, BNP Paribas said. The firm estimates TPU revenue of more than $4 billion in 2026, followed by more than $40 billion in 2027 and $30 billion in 2028.

The brokerage expects TPU sales to add significantly to operating profit dollars but to weigh on Google Cloud's operating margins in the near to medium term. It estimates margin dilution of about 115 basis points in 2027 and more than 50 basis points in 2028.

BNP Paribas said supply chain constraints could affect the timing of sales, while limited information on TPU economics leaves uncertainty around the impact on profits.

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