OpenAI has finalized a deal with Alphabet's Google Cloud to meet its growing computing needs, according to three sources.

The agreement, concluded in May after several months of discussions, marks a shift for OpenAI as it diversifies beyond its previous exclusive cloud provider, Microsoft Azure.

This move supports OpenAI’s increasing demand for computing capacity to train and deploy AI models like ChatGPT.

Strategic Benefits for Google Cloud and OpenAI

The partnership allows Google Cloud to supply additional computing power for OpenAI’s AI training and inference infrastructure.

Despite their intense competition in AI, both companies agreed to collaborate to satisfy the massive compute requirements.

Scotiabank analysts described the development as "somewhat surprising," highlighting the growth opportunity for Google’s cloud business, while noting the threat ChatGPT poses to Google’s search dominance.

Market Pressures and Competitive Dynamics

Alphabet faces pressure to balance its cloud offerings and AI development amid competition.

Google’s DeepMind competes directly with OpenAI and Anthropic in AI model development.

CEO Sundar Pichai has downplayed concerns about ChatGPT overtaking Google’s search dominance, stating the AI race "may not be winner-take-all" .

Alphabet's AI-related capital expenditures are projected to reach $75 billion this year.

OpenAI’s Compute Diversification Strategy

OpenAI has broadened its computing sources by partnering with SoftBank, Oracle, and CoreWeave, and is designing its own chip to lessen reliance on external hardware providers.

This Google deal further reduces OpenAI’s dependence on Microsoft, whose Azure cloud had been the exclusive provider until January.

Negotiations between OpenAI and Microsoft continue over investment terms and Microsoft’s future equity stake.

Google’s Cloud Growth and TPU Utilization

Google is expanding the use of its in-house tensor processing units (TPUs), which were previously for internal use only.

This has attracted clients such as Apple and startups like Anthropic and Safe Superintelligence, competitors of OpenAI.

Adding OpenAI to its cloud clients demonstrates Google’s use of AI hardware and software innovations to grow its cloud business.

However, Google is managing chip supply constraints and balancing capacity between its enterprise and consumer business segments.

PHOTO: UNSPLASH

This article was created with AI assistance.