CoreWeave to provide computing capacity to Google’s cloud unit

CoreWeave, which sells computing services built on Nvidia’s graphics processing units, will provide computing capacity to Google’s cloud unit, according to sources familiar with the matter. The sources also said Google will then sell that computing capacity to OpenAI to meet the growing demand for services like ChatGPT.

OpenAI has dealt with increasing demand for computing capacity for training language models and running inference since ChatGPT was established in late 2022. The firm acknowledged on Monday that its annualized revenue run rate climbed to $10 billion as of June, positioning the company to hit its full-year target amid booming adoption of AI.

AI sector sees growing demand for computing resources

CoreWeave is expected to bank big in Google’s newly signed partnership with OpenAI, sources familiar with the matter told Reuters. The sources revealed that the neocloud company will provide computing capacity to Google’s cloud unit.

Google will sell the computing capacity to OpenAI’s infrastructure for training and running its AI models, including ChatGPT. The sources, who requested anonymity, added that the tech firm will also provide some of its computing resources to OpenAI.

“The infrastructure that you need to build and deliver artificial intelligence is one of the true super cycles that exist. Working with the clients who are building the infrastructure that will drive artificial intelligence, there has been no reduction in demand.”

-Mike Intrator, CEO at CoreWeave

The details of the arrangement first came to light on Tuesday, showing the evolving dynamics between hyperscalers like Amazon, Microsoft, and Google and neocloud companies like CoreWeave. Hyperscalers are large cloud service providers that provide cloud infrastructure and massive-scale data centers. 

The surge in demand for computing resources has generated major investment commitments and turned rivals into partners. CoreWeave signed up Google as a customer in the first quarter, and it was backed by OpenAI and Nvidia.

CoreWeave has already been a major supplier of OpenAI’s infrastructure, where it signed a five-year contract worth $11.9 billion to provide dedicated computing capacity for OpenAI’s model training and inference. The artificial intelligence firm also took a $350 million equity stake in CoreWeave in March. OpenAI boosted the partnership last month through an additional agreement worth up to $4 billion, extending through April 2029.

The sources argued that Google Cloud, as a new customer, could help CoreWeave diversify its revenue resources. They also believe that having a credible partner with deep pockets like Google enables the startup to secure more favorable financing terms to support ambitious data center builds across the country.

According to the sources, the partnership could also boost Google’s cloud unit, which generated $43 billion in sales last year, allowing it to capitalize on the growth of OpenAI. They also acknowledged that the deal positions Google as a neutral provider of computing resources in competition with peers such as Amazon and Microsoft.

Tech companies reevaluate deals with their partners

The deal coincides with Microsoft’s re-evaluation of its data center strategy, including withdrawing from certain data center leases. The tech company, once CoreWeave’s largest customer, accounting for about 62% of its 2024 revenue, is also negotiating with OpenAI to revise the terms of their multibillion-dollar investment, including the future equity stake it will hold in OpenAI.

The partnership with Google is the latest of several initiatives made by OpenAI to reduce its dependence on Microsoft, whose Azure cloud service had served as the ChatGPT maker’s exclusive infrastructure provider until January. Both companies were in discussions for months but were previously blocked from signing a deal due to OpenAI’s lock-in with Microsoft. Intrator said the OpenAI contract decreases the single client concentration, which he hopes CoreWeave will continue to do in the future.

CoreWeave’s executives also revealed that their contract with Microsoft hasn’t changed, and they haven’t seen any commitments canceled or withdrawn by the cloud giant.

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