OpenAI plans to onboard Google Cloud—part of Alphabet Inc.—as one of its computing infrastructure providers to meet surging demand for AI workloads, according to sources familiar with the matter. The agreement was finalized in May.
In a surprising twist to Silicon Valley's fierce AI competition, OpenAI has reached a cloud services agreement with Google, signaling a strategic move to expand computing capacity while reducing its reliance on longtime partner Microsoft.
In a research note issued on June 10, analysts at Scotiabank called the development somewhat surprising, highlighting both the growth potential of Google's cloud division and the mounting competitive pressure posed by 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.
This is a significant positive for Google Cloud, though the competitive threat ChatGPT poses to Google's dominance in search should not be underestimated.
According to a report from Reuters, the two companies finalized the deal in May after months of negotiations. Talks had reportedly been delayed due to contractual restrictions tied to Microsoft, a major investor in and cloud provider for OpenAI.
The agreement marks a significant shift. While OpenAI has long depended on Microsoft's Azure platform for its cloud and AI infrastructure, the company has recently broadened its partnerships. These include the Stargate project with SoftBank and Oracle, as well as a major computing contract with CoreWeave. OpenAI is also developing its own AI chips to further diversify its supply chain and reduce external dependency.
For Google, the deal underscores a complex relationship: OpenAI is not only a competitor in generative AI—its ChatGPT product challenges Google Search directly—but also now a customer. The partnership highlights the growing trend of coopetition in the tech industry, where rivals often depend on each other for critical infrastructure.
The agreement also reflects the growing strength of Google Cloud's AI capabilities, which have helped it attract high-profile clients including Apple, Anthropic, and Safe Superintelligence. Analysts say Google's in-house development of TPUs has been instrumental in luring AI companies to its platform.
In 2024, Google Cloud generated US$43 billion in revenue, accounting for 12% of Alphabet's total earnings. The company has announced a capital expenditure plan of US$75 billion for 2025, with most of the investment directed at AI and cloud infrastructure. Rivals Microsoft and Amazon have outlined similar spending priorities.
Still, scaling cloud capacity is proving challenging. In an April earnings call, Google CFO Anat Ashkenazi acknowledged that cloud demand was outpacing supply. The company now faces a balancing act: expanding its infrastructure to meet rising demand while sharpening its own AI services to remain competitive in a rapidly evolving landscape.
Article edited by Jack Wu
