Netflix Inc.‘s (NASDAQ:NFLX) $82.7 billion acquisition of Warner Bros. Discovery (NASDAQ:WBD) is a bet on artificial intelligence and chips as much as movies and shows, according to Melissa Otto, head of research at S&P Global Visible Alpha.
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According to Otto, the deal can't be fully understood without considering Alphabet Inc.'s (NASDAQ:GOOG) (NASDAQ:GOOGL) technology ambitions, Fortune reported.
Google TPU Chips Drive Strategy
Otto told Fortune that a central question for the future of entertainment is who controls premium video at scale, as generative AI increasingly creates and personalizes moving images.
She described this collection as the “video corpus” that will train next-generation AI models.
“If I were Netflix and I knew that Google had this chip technology and was essentially plowing billions of dollars into developing infrastructure so they could carve out the corpus of the video modality in generative AI, I would want to build a moat around my business,” Otto told Fortune.
In the competitive AI landscape, Google’s TPU chips are considered a fundamental threat to Netflix, as these chips are designed for media content generation, synthetic speech, and vision services.
Netflix Trails YouTube In Viewership Battle
Nielsen data from October shows why the Warner acquisition makes strategic sense for Netflix.
Netflix is already losing to Google's YouTube in viewership. YouTube commanded 12.9% of total TV viewing time among persons aged 2 and older, while Netflix held 8%. Even combined with Warner Bros. Discovery's 1.3% share, the merged entity would still trail YouTube's reach.
TPU Competition Adds Urgency To Netflix Deal
Google’s TPU chips have gained significant traction in recent months.
They are not only a threat to Netflix, but some say they have challenged Nvidia Corp.'s (NASDAQ:NVDA) AI market dominance, though market strategist James E. Thorne of Wellington-Altus Private Wealth argues that hyperscalers turn to TPUs as a hedge against Nvidia's tight supply and long lead times for Blackwell and Rubin GPUs, rather than as a universal replacement.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
