Alphabet Inc. (NASDAQ:GOOG) shares are trading higher Tuesday following reports that OpenAI has signed a cloud services deal with Google, marking a rare partnership between two direct competitors in the AI space.
What’s Going On: OpenAI is planning to add Google’s cloud service after the companies finalized a deal in May in order to help OpenAI meet growing demand for computing power as it scales its AI operations, according to Reuters.
Three sources reportedly told Reuters that the agreement will provide OpenAI access to Google Cloud's infrastructure, specifically its advanced computing capacity, to support the training and deployment of AI models like ChatGPT. The move allows OpenAI to further diversify beyond its reliance on Microsoft Azure, which had been its exclusive infrastructure provider until earlier this year.
The partnership is seen as a win for Google's cloud business, which accounted for $43 billion of Alphabet's 2024 revenue and has been working to expand its share in the AI infrastructure space. Google has increasingly leaned on its in-house chip technology, known as TPUs, to attract enterprise clients including Apple and AI-focused startups like Anthropic. Adding OpenAI to that list reinforces Google's positioning as a serious competitor to Microsoft and Amazon in the cloud market.
Despite the ongoing rivalry between Google and OpenAI in AI product development, especially with ChatGPT directly challenging Google Search, the deal highlights the complexity of the AI infrastructure market, where even rivals may rely on each other to meet operational demands. Google executives have acknowledged that the AI race may not be winner-take-all, and this collaboration reflects that evolving reality.
Alphabet shares moved higher on Tuesday as investors reacted to the potential long-term value of the deal, which could support further monetization of Google's capital-intensive AI infrastructure investments, even as competition and regulatory pressure intensify.
GOOG Price Action: Alphabet shares were up 1.53% at $180.33 at the time of publication Tuesday, according to Benzinga Pro.
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