OpenAI has signed an agreement to use Alphabet’s Google Cloud services to support its growing computing needs for AI development.

The deal, finalized in May, allows OpenAI to diversify its infrastructure and reduce reliance on Microsoft’s Azure, its main provider.

OpenAI is also exploring partnerships with Oracle and CoreWeave to expand its computing capacity.

Google Cloud will provide resources for training and operating OpenAI’s AI models. This comes as ChatGPT continues to compete with Google’s search engine.

Alphabet, Microsoft, and OpenAI declined to comment.

After the news, Alphabet’s stock rose 2.1%, while Microsoft’s dropped 0.6%.

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🔗 Source: Reuters

🧠 Food for thought

1️⃣ AI computing demands are reshaping traditional tech rivalries into complex “coopetition”

The Google-OpenAI cloud deal highlights how extreme AI computing requirements are forcing competitors to collaborate in ways previously unthinkable.

This partnership emerges despite ChatGPT representing one of the most significant threats to Google’s core search business in years 1.

The cloud computing landscape has evolved into a three-way race with AWS (29%), Microsoft (22%), and Google Cloud (12%) collectively controlling 63% of the market as of Q1 2025 2.

Computing constraints have become the primary bottleneck for AI advancement, with Google’s CFO acknowledging in April that they lacked sufficient capacity to meet customer demand 1.

These resource limitations have created a market dynamic where AI model developers and cloud providers form strategic alliances even while competing fiercely in other domains.

The deal demonstrates that in the AI era, access to specialized computing resources can outweigh competitive concerns, transforming traditional industry rivalries into complex relationships that blend competition and cooperation.

2️⃣ OpenAI’s multi-pronged strategy to reduce dependency on single infrastructure providers

The Google Cloud partnership represents just one facet of OpenAI’s systematic effort to diversify its computing resources beyond Microsoft’s Azure, which had been its exclusive provider until January 2025 1.

OpenAI’s strategy includes multiple parallel initiatives: partnerships with SoftBank and Oracle on the Stargate infrastructure program, billion-dollar deals with CoreWeave, and development of in-house chips 1.

This diversification approach mirrors patterns seen across the tech industry, where AI companies increasingly seek multiple infrastructure partners to mitigate supply risk and improve negotiating leverage.

The timing is particularly significant as Microsoft and OpenAI are currently renegotiating the terms of their multibillion-dollar investment, including Microsoft’s future equity stake in OpenAI 1.

The company’s approach demonstrates how even AI organizations with substantial revenue ($10 billion annualized run rate as of June 2025) remain vulnerable to infrastructure dependencies 1.

OpenAI’s evolution from a nonprofit founded in 2015 to its current hybrid structure reflects the enormous capital requirements of leading-edge AI development, necessitating these complex partnerships 3.

3️⃣ Google’s delicate balancing act between cloud growth and AI competitive positioning

Google’s cloud unit faces the complex challenge of simultaneously supporting potential AI rivals while developing competing products through its DeepMind division 1.

This partnership comes shortly after Google’s announcement of its seventh-generation TPU (Ironwood), which delivers over 42 exaflops of computing power per pod, designed specifically for large AI model optimization 4.

Google Cloud has positioned itself as a “neutral arbiter of computing resources,” hoping this approach will help it outcompete Amazon and Microsoft as the provider of choice for AI startups 1.

The strategy appears to be working, with Google Cloud growing 28% year-over-year to reach $12.3 billion in Q1 2025 revenue, outpacing both Microsoft’s cloud growth (21%) and AWS (17%) 2.

By supplying infrastructure to OpenAI, Google must carefully allocate its limited chip capacity between external customers and internal AI initiatives, creating tension between short-term cloud revenue and long-term competitive positioning 1.

This approach reflects the broader industry struggle to balance immediate market opportunities against strategic competitive concerns in the rapidly evolving AI landscape.

Recent OpenAI developments

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