Alphabet (GOOGL) Lands Surprise Win as OpenAI Picks Google Cloud for AI Expansion

Alphabet Inc. (NASDAQ:GOOGL) is one of the 10 AI Stocks on Wall Street’s Radar. On June 10, Reuters reported that OpenAI is planning to add Alphabet Inc. (NASDAQ:GOOGL)’s Google cloud service to meet its growing needs for computing capacity. Despite being competitors in the artificial intelligence space, the collaboration is a surprising highlight of the strategic need for companies to pool resources to accelerate AI adoption.

According to the sources, the deal was under discussion for a few months and was finalized in May. The massive demand for computing to train and deploy AI models significantly reshapes competitive dynamics, highlighting OpenAI’s latest efforts to diversify its compute sources beyond Microsoft.

Alphabet (GOOGL) Lands Surprise Win as OpenAI Picks Google Cloud for AI Expansion

Google’s cloud unit will now supply additional computing capacity to OpenAI’s existing infrastructure for training and running its AI models, a major win for the company.

Discussing the aforementioned deal, Scotiabank analysts have deemed the development to be “somewhat surprising.” They pointed toward growth opportunities for Google’s Cloud unit and also expressed caution regarding competition from 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.”

-Scotiabank Analysts

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