Alphabet, the parent company of Google, is developing a new server chip aimed at boosting the efficiency of its internal Gemini models. The chip, which has the internal codename "Frozen v2," is expected to launch sometime in 2028, as reported by The Information, citing unnamed sources. According to the report, this chip could be six to ten times more efficient than Google's current AI chips, measured by the number of tokens generated per unit of power consumed. The company did not deny the claims. "While not every project moves into production, this rigorous exploration is central to our full stack approach. By co-designing our hardware and software from the ground up, we ensure our systems are integrated and highly optimized for real-world workloads."

AI firms are increasingly turning to custom chip development as a strategy to enhance the performance of their proprietary models and address the global shortage of AI computing capacity. Efficiency has become a major selling point for tech companies, especially as concerns over AI spending have tempered the market enthusiasm that once defined the sector. Meanwhile, companies are actively seeking to reduce their reliance on Nvidia, the chipmaker that has historically dominated the AI chip market and left many major AI developers dependent on its hardware. In June, OpenAI introduced its first custom chip, an inference processor named Jalapeño. Earlier this month, reports surfaced that Anthropic is in talks with Samsung about a new chipmaking collaboration.

Investors have previously expressed concerns about Alphabet's massive planned expenditures, designed to support its AI strategy. Earlier this year, Google announced plans to spend between $180 billion and $190 billion. With such a significant amount of money on the line, the company needs to demonstrate that these investments will yield returns. News of the more efficient Frozen v2 chip seems to have reassured investors, giving Google a boost ahead of its earnings report later this week. Following the publication of The Information's report, the company's stock rose about 3% on Monday morning.