Alpha Galactica logo Alpha Galactica Technology Investment Insights

Claim under review / Semiconductors

Custom silicon is reducing dependence on merchant GPUs

Large compute buyers may be moving more production workloads onto their own accelerators.

NVDA AMD AVGO GOOGL AMZN

Current assessment

New evidence

Evidence of hyperscalers moving towards in-house silicon continues to accumulate. Microsoft's reported push to substitute merchant GPUs with its own accelerators follows Alibaba's custom chip deployments, pointing to a broader pattern among tier-one cloud providers seeking to curb merchant chip costs. The development reinforces expectations of procurement shifts to improve operating margins. However, merchant GPUs still dominate frontier training clusters, and it remains an open question whether homegrown silicon can efficiently support third-party cloud customers at scale or will remain focused on internal workloads.

Latest development: On October 12, 2026, CNBC reported that Microsoft plans to increase its reliance on homegrown AI processors, aiming to reduce dependence on Nvidia chips, expand profit margins, and strengthen its internal AI stack.

Last material update
13 Oct 2026
Last checked
13 Oct 2026

Development history

2 updates

  1. On October 12, 2026, CNBC reported that Microsoft plans to increase its reliance on homegrown AI processors, aiming to reduce dependence on Nvidia chips, expand profit margins, and strengthen its internal AI stack.

    Evidence of hyperscalers moving towards in-house silicon continues to accumulate. Microsoft's reported push to substitute merchant GPUs with its own accelerators follows Alibaba's custom chip deployments, pointing to a broader pattern among tier-one cloud providers seeking to curb merchant chip costs. The development reinforces expectations of procurement shifts to improve operating margins. However, merchant GPUs still dominate frontier training clusters, and it remains an open question whether homegrown silicon can efficiently support third-party cloud customers at scale or will remain focused on internal workloads.

  2. Alibaba unveiled a new proprietary AI chip to support its global data center expansion, adding another major cloud provider to the list of hyperscalers deploying custom silicon.

    Large compute buyers continue to advance their proprietary hardware to reduce reliance on merchant GPUs. Alibaba has introduced a new proprietary AI chip alongside plans to significantly expand its global data center capacity. This deployment by a major cloud provider strengthens the trend of hyperscalers migrating workloads to in-house accelerators, potentially redistributing chip spending across the semiconductor supply chain.