In a surprising move given their rivalry in the AI space, OpenAI has reportedly struck a deal to utilise Google Cloud’s services to meet its escalating computing needs. While the terms of the agreement remain undisclosed, Reuters reports that negotiations have been ongoing for several months. This partnership signifies OpenAI’s continued effort to diversify its compute infrastructure beyond its primary provider, Microsoft Azure.
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Until recently, Microsoft Azure was OpenAI’s exclusive data centre provider. However, OpenAI CEO Sam Altman previously attributed product delays to a lack of compute capacity, prompting the company to seek additional resources. In March, OpenAI inked a substantial, nearly $12 billion deal with CoreWeave for increased cloud compute capacity.
Despite this new agreement with Google, OpenAI’s relationship with Microsoft remains strong. OpenAI continues to heavily rely on Azure, and the two companies are currently in talks to revise their partnership terms, which are expected to include adjustments to Microsoft’s equity stake in OpenAI.
This deal is undeniably a significant win for Google Cloud. Even as ChatGPT poses the biggest threat to Google’s core search business in years, this collaboration could signal a softening in the competitive landscape. Regardless, it’s set to inject substantial revenue into Google Cloud, which generated $43 billion last year and accounted for 12% of Alphabet’s overall revenue. Adding OpenAI to its customer portfolio will likely boost these figures dramatically.
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However, a key question looms: Google Cloud has historically struggled to meet existing customer demand for its services, even before taking on OpenAI. This raises concerns about whether OpenAI will receive priority access over pre-existing customers, given Google’s need for more data centres.
Meanwhile, OpenAI continues its robust growth. The company recently announced that its current software adoption rate is projected to lead to $10 billion in annual revenue by June, with a target revenue goal of around $12 billion for the year, a target it anticipates easily meeting with new subscribers.
