OpenAI Strikes Unprecedented Cloud Deal with Google Amid Ongoing AI Rivalry

OpenAI signs a major cloud deal with Google, reshaping the artificial intelligence landscape and intensifying the AI rivalry among tech giants.

June 11, 2025 10:20 AM

2 MIN TO READ

Bill O'Neill

OpenAI Strikes Unprecedented Cloud Deal with Google Amid Ongoing AI Rivalry

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penAI has signed an unprecedented cloud deal with Google, a move that signals a major shift in the artificial intelligence landscape and intensifies

the ongoing rivalry among tech giants. The agreement, finalized in May 2025, after months of negotiation, reflects a broader trend of strategic flexibility in the highly competitive AI infrastructure market.

Although OpenAI, Google, and Microsoft declined to comment, sources close to the matter confirmed the deal had been in the works for some time. Previously, OpenAI had an exclusive cloud partnership with Microsoft’s Azure. The new OpenAI cloud deal allows OpenAI to tap into Google Cloud’s resources, including its high-performance Tensor Processing Units(TPUs) – technology previously reserved for Google’s internal use.

The partnership not only diversifies OpenAI’s infrastructure strategy but also marks a win for Google Cloud, which reported $43 billion in revenue in 2024, roughly 12% of Alphabet’s total income. Analysts view the deal as a calculated play by both companies to address the exploding demand for computing power in AI development

On Monday, Google announced that its annualized revenue run rate hit $10 billion in June, driven by the growing adoption of AI technologies by enterprises. This surge puts the company on track to meet its ambitious 2025 goals, reinforcing its leadership in the artificial intelligence race.

Earlier this year, OpenAI also partnered with SoftBank and Oracle for a $500 billion StarGate infrastructure initiative and signed multibillion-dollar deals with CoreWeave. This Google deal adds another layer of resilience to OpenAI’s backend capacity while reducing its dependency on Microsoft.

Market reactions reflected the significance of the deal: Alphabet shares rose by 2.1%, following the news, while Microsoft stock dipped by 0.6%. Google Cloud’s expanding list of high-profile clients now includes Apple, Anthropic, Safe Superintelligence, and OpenAI.

Despite the apparent AI rivalry, this move highlights the practicality driving modern tech alliances. Experts suggest that neither company views the AI race as a winner-take-all. Instead, they’re focusing on scaling infrastructure fast enough to meet explosive demand.

Still, the shift poses new operational challenges. Alphabet CFO Anat Ashkenazi admitted during the Q1 2025 earnings call that Google Cloud was already running near full capacity: “Google already lacked sufficient capacity to meet its cloud customers’ demands as of the last quarter,” she told analysts in April, according to Reuters.

The deal with Google highlights OpenAI’s shift toward a multi-cloud strategy and a more pragmatic approach to working with competitors. By partnering with Google and others like Oracle and CoreWeave, OpenAI is securing the computing it needs while avoiding overreliance on Microsoft.

This agreement also raises operational questions, as Google Cloud was already running at high capacity, forcing executives to rethink how resources are allocated across internal teams and external partners.