can someone help me understand how the following can be true:

1. TPU's are a serious competitor to nvidia chips.

2. Chip makers with the best chips are valued at 1-3.5T.

3. Google's market cap is 2T.

4. It is correct for google to not sell TPU's.

i have heard the whole, its better to rent them thing, but if they're actually good selling them is almost as good a business as every other part of the company.

Wall street undervalued Google even on day one (IPO). Bezos has said that some of the times the stock had been doing the worst were when the company was doing great.

So, to help you understand how they can be true: market cap is governed by something other than what a business is worth.

As an aside, here's a fun article that embarrasses wall street. [0]

[0] https://www.nbcnews.com/id/wbna15536386

Aside from the specifics of Nvidia vs Google, one thing to note regarding company valuations is that not all parts of the company are necessarily additive. As an example (read: a thing I’m making up), consider something like Netflix vs Blockbuster back in the early days - once Blockbuster started to also ship DVDs, you’d think it’d obviously be worth more than Netflix, because they’ve got the entire retail operation as well, but that presumes the retail operation is actually a long-term asset. If Blockbuster has a bunch of financial obligations relating to the retail business (leases, long-term agreements with shippers and suppliers, etc), it can very quickly wind up that the retail business is a substantial drag on Blockbuster’s valuation, as opposed to something that makes it more valuable.

Selling them and supporting that in the field requires quite some infrastructure you'd have to build. Why go through all that trouble if you already make higher margins renting them out?

Also, if they are so good, it's best to not level the playing field by sharing that with your competitors.

Also "chip makers with the best chips" == Nvidia, there aren't many others. And Alphabet does more than just produce TPUs.

nvidia, who make AI chips with kinda good software support, and who have sales reflecting that, is worth 3.5T

google, who make AI chips with barely-adequate software, is worth 2.0T

AMD, who also make AI chips with barely-adequate software, is worth 0.2T

Google made a few decisions with TPUs that might have made business sense at the time, but with hindsight haven't helped adoption. They closely bound TPUs with their 'TensorFlow 1' framework (which was kinda hard to use) then they released 'TensorFlow 2' which was incompatible enough it was just as easy to switch to PyTorch, which has TPU support in theory but not in practice.

They also decided TPUs would be Google Cloud only. Might make sense, if they need water cooling or they have special power requirements. But it turns out the sort of big corporations that have multi-cloud setups and a workload where a 1.5x improvement in performance-per-dollar is worth pursuing aren't big open source contributors. And understandably, the academics and enthusiasts who are giving their time away for free aren't eager to pay Google for the privilege.

Perhaps Google's market cap already reflects the value of being a second-place AI chipmaker?

I believe Broadcom is also very involved in the making of the TPU's and networking infrastructure and they are valued at 1.2T currently. Maybe consider the combined value of Broadcom and Google.

If they think they’ve got a competitive advantage vs. GPUs which benefits one of their core products, it would make sense to retain that competitive advantage for the long term, no?

Aren't Google's TPUs a bit like a research project with practical applications as a nice side effect?

Like other Google internal technologies, the amount of custom junk you'd need to support to use a TPU is pretty extreme, and the utility of the thing without the custom junk is questionable. You might as well ask why they aren't marketing their video compression cards.

Nvidia is selling a ton of chips on hype.

Google is saving a ton of money by making TPUs, which will pay off in the future when AI is better monetized, but so far no one is directly making a massive profit from foundation models. It's a long term play.

Also, I'd argue Nvidia is massively overvalued.