Google's parent company Alphabet is in talks to buy a special semiconductor chip that it has been making for itself, with another major technology company, Meta, in talks to buy it. The news that Meta is set to buy Google's chip for billions of dollars has sent shockwaves through the tech market.

This incident is a sign of Google's increasing competition with Nvidia, which has been dominating the semiconductor sector, according to international media outlets including Reuters.

Meta is also discussing leasing a special chip used in Google Cloud. It is understood that Meta plans to buy the chip from Google early next year and use it on lease. Meta is going to purchase the fourth version of Tensor Processing Units (TPUs) developed by Google for artificial intelligence (AI)-related tasks. Google has also discussed selling its chip for the first time, and this is a big deal, according to the news on the 'The Information' portal.

Until now, Google had only been using TPUs in its own data centers. Now, when this chip starts being sold to other companies, it is being analyzed that it will increase Google's chip market size and Google will now compete directly with companies like Nvidia. This is expected to affect Nvidia's share of the multi-billion dollar AI market. According to Reuters, some Google Cloud employees have claimed that Google's strategy will cut Nvidia's annual revenue by 10 percent.

Meta, on the other hand, is adopting a dual strategy in terms of chips. On the one hand, it is looking to partner with Google, and on the other hand, it seems to be trying to make its own separate chips. According to an analysis by The Business Standard, Meta wants to reduce its dependence on Nvidia in graphic processing units (GPUs) and break Nvidia's dominance in AI. Experts estimate that if Meta buys TPUs from Google and diversifies its graphics and other infrastructure, it could save $4 to $7 billion annually.

Nvidia, the leader in AI chip manufacturing, has been hit in the initial stages by Google's market entry and the Google-Meta partnership. Nvidia's share price fell 3.2 percent on Tuesday after the news broke. Alphabet's share price rose 4 percent, giving the company a market valuation of $4 trillion. Nvidia is the only company to have hit the $4 trillion market cap. Microsoft and Apple are also close to the $4 trillion mark. Meta is a big customer for chipmakers, with Meta spending $72 billion on chip purchases this year alone.

Google will not find it easy to break Nvidia's dominance in the chip manufacturing sector, according to an analysis by Aditya Soni and Rajbir Singh Pradesh in Reuters. “If Google is to break Nvidia’s market dominance, it will have to replace the network that the company has built in the market over the past two decades, which is very difficult,” they wrote. “More than 4 million developers around the world use Nvidia’s Cuda software platform to build AI and other applications.”