The news: OpenAI finalized a deal with Google Cloud to supplement its Microsoft Azure infrastructure, per Reuters. The deal addresses OpenAI’s growing compute needs as its annual revenues hit $10 billion, up from $5.5 billion in December. OpenAI’s ChatGPT and Google Gemini are the biggest rivals in the AI industry.

The cloud deal effectively ends Microsoft’s exclusivity as ChatGPT’s cloud provider and is likely another indicator that the two companies are growing apart. It’s also a warning that OpenAI could be exceeding the limits of existing cloud infrastructure, especially given its recent service outages. 

Having OpenAI as a client can boost Google Cloud, which 47% of US business leaders expect to be a generative AI (genAI) leader within five years, per Wharton School of Business.

3 quick takeaways:

• OpenAI will partner with anyone to secure its lead. A Microsoft-backed startup joining Google Cloud would’ve seemed impossible until now, but AI’s insatiable demand for computing power can break old rivalries. Microsoft owns 49% of OpenAI, yet even that couldn’t lock in exclusivity.
• Adding Google Cloud might not be enough for OpenAI’s expansion. With its recurring revenues doubling, 500 million weekly active users in March, and an ambitious  $125 billion in revenue target by 2029, OpenAI’s expansion could outgrow current supply.
• Cloud providers are the big winners of the AI era. AI cloud computing is necessary for training AI models, hosting AI solutions, and running genAI processes. Powerful cloud infrastructure will continue to yield dividends from AI’s growth.

Google’s AI advantage drives value: Its AI-optimized Tensor Processing Units (TPUs) attract rivals like OpenAI. By powering competitors, it cements its position as the neutral infrastructure choice for cutting-edge AI.

Apple is another tech rival reliant on Google Cloud and is using more than 10,000 TPU processors to bolster its AI workflows.

Our take: The OpenAI-Google Cloud alliance signals a new era of pragmatic AI partnerships and the importance of diversified cloud strategies to support the explosion in AI usage.