OpenAI Signs Cloud Deal With Google Despite Fierce AI Competition

In an unexpected move, OpenAI has signed a deal to use Google’s cloud infrastructure to support its growing AI operations, according to Reuters. The agreement, finalized in May, adds Google Cloud as a new provider of computing capacity for OpenAI—despite the fact that the two companies are direct competitors in the race to develop next-generation artificial intelligence.

The deal highlights how surging demand for “compute”—the processing power needed to train and deploy large language models—is reshaping alliances in the tech sector. While OpenAI’s biggest backer remains Microsoft, this partnership suggests the company is taking active steps to diversify its infrastructure and reduce dependency.

Neither OpenAI, Google, nor Microsoft responded to requests for comment.

A Strategic Win for Google Cloud

Under the agreement, Google Cloud will contribute computing capacity for training and inference—the two key computational stages behind models like ChatGPT. The deal is a notable win for Google’s cloud unit, which has been aggressively expanding its customer base in a competitive market dominated by Microsoft Azure and Amazon Web Services.

Alphabet’s stock rose 2.1% following the news, while Microsoft shares slipped slightly. Analysts at Scotiabank described the development as “somewhat surprising,” calling it a growth opportunity for Google Cloud but also highlighting the risk posed by ChatGPT to Google’s core search business.

Despite those risks, both sides appear willing to set rivalry aside for now. “The deal ... underscores the fact that the two are willing to overlook heavy competition between them to meet the massive computing demands,” Scotiabank analysts wrote.

OpenAI’s Expanding Infrastructure Footprint

Since the launch of ChatGPT in 2022, OpenAI’s need for compute has scaled dramatically. The company now supports training ever-larger models while also serving a growing number of users in real-time—tasks that require extensive cloud resources.

OpenAI recently announced that it has reached an annualized revenue run rate of $10 billion, fueled by widespread adoption of ChatGPT and its API offerings. To support that growth, it has also:

• Partnered with SoftBank and Oracle on the $500 billion Stargate data center project

• Signed billion-dollar infrastructure deals with CoreWeave

• Accelerated plans to design its own AI chips, with a prototype expected later this year

Until January, Microsoft Azure was OpenAI’s exclusive cloud provider. A source told Reuters that talks with Google had been underway for months but were previously blocked due to contract terms with Microsoft. The two companies are now reportedly renegotiating the structure of Microsoft’s multibillion-dollar investment, including its future equity stake in OpenAI.

Google Balances Cloud Growth and Internal Demands

For Google, the OpenAI partnership also reflects a broader strategy to expand use of its Tensor Processing Units (TPUs)—custom AI chips that were once reserved for internal teams like DeepMind. The company has since opened TPU access to major tech firms and AI startups including Apple, Anthropic, and Safe Superintelligence.

Bringing OpenAI on board further boosts Google’s position as a high-performance infrastructure provider for AI—but it also adds new complexity. Google’s DeepMind unit directly competes with OpenAI, and TPU supply is already strained. In April, Alphabet CFO Anat Ashkenazi acknowledged that the company lacked sufficient capacity to meet all cloud customer demand.

Balancing those resources between Google’s enterprise customers, consumer products, and internal research teams will become increasingly difficult as demand continues to climb.

What This Means

This deal signals a shift in how tech giants are approaching the AI arms race. Rather than isolating behind closed systems, OpenAI and Google are showing a willingness to partner—even when doing so complicates competitive dynamics.

For OpenAI, it’s a practical step: diversifying cloud providers adds resilience, lowers risk, and provides the scale needed to serve its fast-growing user base. For Google, it’s a high-stakes opportunity to demonstrate the strength of its TPU-powered infrastructure—and convert even its rivals into clients.

But the collaboration also exposes a paradox: the very competition driving AI advancement is now pushing competitors into reluctant partnerships. As computing becomes the new bottleneck in AI progress, access to infrastructure may determine who leads the next chapter of AI.

Editor’s Note: This article was created by Alicia Shapiro, CMO of AiNews.com, with writing, image, and idea-generation support from ChatGPT, an AI assistant. However, the final perspective and editorial choices are solely Alicia Shapiro’s. Special thanks to ChatGPT for assistance with research and editorial support in crafting this article.