OpenAI signs surprising new deal with Google amid fierce AI competition. Here's why

OpenAI is planning to use Google's cloud service in order to meet its need for computing capacity, according to a report by Reuters. The news comes in at a time when OpenAI's ChatGPT is involved in a cut throat race with Google's Gemini to take control of the narrative in the AI race. 

Reportedly, the deal has been under discussions for a few months but was finalized in May. The move is also one of the several ones taken by OpenAI to reduce its reliance on Microsoft who Azure Cloud infrastructure it had used to serve as ChatGPT's exclusive data center till January. 

While the two tech companies had discussed this arrangement for months, OpenAI was previously blocked from signing a deal with Google due to its lock in with Microsoft. Meanwhile, Microsoft and OpenAI are also in discussions to revise their multi-billion dollar investment for the stake Microsoft will hold in ChatGPT maker's future for-profit arm. 

Scotiabank analysts called the deal "somewhat surprising" in a note to Reuters, stating, "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,"

Since the public rollout of ChatGPT in late 2022, OpenAI has had to deal wiht increasing demand for computing capacity in order to train its large language models and for inference - processing information so that people could use these models. 

Earlier in the year, OpenAI had also partnered with SoftBank and Oracle on the $500 billion Stargate project to build AI infrastructure in the US while signing deals in billions with CoreWeave for more compute. Reportedly, it is also on track to finalize the design of its first in-house chip that will potentially reduce its reliance on external hardware providers. 

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