Alphabet Inc ( GOOG ) shares are trading higher Tuesday following reports suggesting the company is developing its own in-house chips to cut costs associated with AI development.

What To Know: According to a Wall Street Journal report, Google ( GOOG ) is rolling out a new in-house chip called Axion that can handle everything from YouTube ( GOOG ) advertising to big data analysis.

The in-house chip efforts are expected to reduce the company’s reliance on outside vendors and bring it into competition with longtime partners like Intel Corp ( INTC ) and Nvidia Corp ( NVDA ) .

"I see this as a basis for growing the size of the pie," Amin Vahdat, the Google ( GOOG ) vice president overseeing the company's in-house chip operations, told the Wall Street Journal.

Axion is reportedly based on circuitry from chip-design firm Arm Holdings Plc ( ARM ) , making Google ( GOOG ) the third big tech company after Amazon and Microsoft to use the Arm framework to develop its own data center CPU. 

Google ( GOOG ) officials said the Axion chips are suitable for a range of tasks including powering the company’s search engine and AI-related work. The chips also play an important supporting role in AI by helping process large amounts of data and deploying services to billions of users.

"Becoming a great hardware company is very different from becoming a great cloud company or a great organizer of the world's information," Vahdat said.

Google’s Axion chips are expected to become accessible for external customers later this year. The chips will improve performance by up to 30% compared with the fastest similar chip available in the cloud. Google ( GOOG ) noted that customers are already planning to test its new hardware.

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GOOG Price Action: Alphabet shares were up 1.21% at $158.02 at the time of publication, according to Benzinga Pro.