Kenrick Cai and Krystal Hu
4 min read
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By Kenrick Cai and Krystal Hu
SAN FRANCISCO (Reuters) -OpenAI plans to add Alphabet's Google cloud service to meet its growing needs for computing capacity, three sources told Reuters, marking a surprising collaboration between two prominent competitors in the artificial intelligence sector.
The deal, which has been under discussion for a few months, was finalized in May, one of the sources added. It underscores how massive computing demands to train and deploy AI models are reshaping the competitive dynamics in AI, and marks OpenAI's latest move to diversify its compute sources beyond its major supporter Microsoft, including its high-profile Stargate data center project.
It is a win for Google's cloud unit, which will supply additional computing capacity to OpenAI's existing infrastructure for training and running its AI models, sources said, who requested anonymity to discuss private matters. The move also comes as OpenAI's ChatGPT poses the biggest threat to Google's dominant search business in years, with Google executives recently saying that the AI race may not be winner-take-all.
OpenAI, Google and Microsoft declined to comment. Alphabet's stock was up 2.1% on Tuesday afternoon following the news, while Microsoft shares were down 0.6%.
Scotiabank analysts called the development "somewhat surprising" in a note on Tuesday, highlighting the growth opportunities for Google's Cloud unit, while expressing caution regarding competition from ChatGPT.
"The deal ... underscores the fact that the two are willing to overlook heavy competition between them to meet the massive computing demands. Ultimately, we view this as a big win for Google’s cloud unit, but ... there are continued worries that ChatGPT is becoming an incrementally larger threat to Google’s search dominance," the analysts wrote.
Since ChatGPT burst onto the scene in late 2022, OpenAI has dealt with increasing demand for computing capacity - known in the industry as compute - for training large language models, as well as for running inference, which involves processing information so people can use these models. OpenAI said on Monday that its annualized revenue run rate surged to $10 billion as of June, positioning the company to hit its full-year target amid booming adoption of AI.
Earlier this year, OpenAI partnered with SoftBank and Oracle on the $500 billion Stargate infrastructure program, and signed deals worth billions with CoreWeave for more compute. It is on track this year to finalize the design of its first in-house chip that could reduce its dependency on external hardware providers, Reuters reported in February.
