Google and Blackstone Collaborate to Launch AI Cloud Company
Google (GOOG, GOOGL) and Blackstone (BX) have announced a new venture aimed at creating an artificial intelligence (AI) cloud company, signalling a noteworthy advancement in the growing competition within AI infrastructure on Wall Street.
Overview of the Joint Venture
This collaboration will focus on offering essential resources for AI operations, including data centre capacity, operational capabilities, and networking solutions, alongside Google Cloud’s Tensor Processing Units (TPUs) as part of a compute-as-a-service model. This joint effort will provide customers with an alternative to access Google’s TPUs, mirroring services offered by other cloud providers like CoreWeave (CRWV).
Blackstone has committed an initial equity investment of $5 billion through its funds and anticipates that the venture will be operational with its first 500 megawatts of power by 2027. Although precise ownership details remain undisclosed, sources indicate that Blackstone will hold a majority stake in the new company.
The Investment Landscape in AI
The launch of this venture underscores the rising appeal of hard assets crucial for AI computations to investors. Major technology firms are projected to spend over $700 billion on capital expenditures associated with AI developments this year alone. However, this investment is still insufficient when considering the $900 billion opportunity that private asset manager Ares estimated exists within third-party data centres.
For Blackstone, this venture represents a strategic move into the AI infrastructure market. Earlier this year, the firm established a new West Coast unit that focuses specifically on investments in AI and rapidly evolving technologies.
Blackstone’s Existing AI Investments
Blackstone’s portfolio already includes substantial stakes in data centre companies, notably QTS, and significant investments in AI ventures such as Anthropic (ANTH.PVT), OpenAI (OPAI.PVT), and SpaceX (SPAX.PVT), which manages xAI. CEO Stephen Schwarzman recently proclaimed that his firm may be the largest investor in AI-related infrastructure globally.
Google’s Strategic Partnerships
Google has been actively securing partnerships to leverage its TPUs. Notable collaborations include a multi-year, multi-billion-dollar agreement with Meta (META) for access to these chips. Additionally, Anthropic is set to utilise Google’s processing capabilities.
The agreement with Blackstone also highlights the mounting competition in the AI chip market, particularly between Nvidia and its hyperscale customers, including Google and Amazon (AMZN). Both companies are vying to rent out their custom chips, with Amazon also offering its proprietary Trainium chips via its AWS service.
Amazon’s Growth in the Chip Market
During Amazon’s recent earnings call, CEO Andy Jassy reported a 40% quarter-on-quarter growth in the chip segment, with an annual revenue run rate surpassing $20 billion. Jassy noted that if the chip business were regarded as a standalone segment that supplied processors to AWS and other third-party clients, it could achieve a staggering $50 billion run rate.
Conclusion
The collaboration between Google and Blackstone indicates a significant shift in how major financial institutions view AI infrastructure as a crucial investment opportunity. As both companies expand their capabilities in the AI sector, the competitive landscape is set to evolve, with substantial implications for the tech industry’s future.
