Enterprise* customers are overwhelmingly more likely to primarily host on Azure than GCP, m365 runs the corporate world top to bottom. OpenAI doesn't care where the customers come from, more platforms == more reach, they have zero reason to be preferential to any single hosting platform.
* By "enterprise" here I mean "big company that is not a tech company". If most of your userbase is carrying a mac, you're probably a tech company. If you're mostly making widgets in factories, chances are high Windows and the ecosystem around it is involved.
You can use your preexisting committed spends for GCP on Open AI, i.e. if an enterprise 10M/year contracted spends for first party GCP services, now they can also use that on OAI models hosted on GCP.
Meaning they can swap out compute/storage spends on GCP to LLM model spend or use left over budget ( which would go waste anyway ) and so on . Any OpenAI sales by GCP teams would be considered against their quota typically in this type of arrangement [2]
This is normally not done to third party[1] marketplace services, Azure already does this for OpenAI, it helps drive some enterprise spends as it is from for fungible budgets or different approving authority internally in a org when it is not a new vendor, new budget etc.
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[1] It is not too hard to get into these types of programs i.e. it not only for OpenAI level partners mid sized startups can also be part of these deals in marketplace, the requirement usually is minimum size and the partner having to prove/show that are spending that customer's revenue on the compute etc so money is going back to them, then AWS/Azure/GCP will consider an org for this type of program.
Given that GCP is hosting these models on their cloud and therefore OpenAI is spending a % of every dollar back on GCP for every token sold like this; it wouldn't have been too hard for OpenAI to got such a program even if they were a mid sized startup.
[2] Multiples maybe involved (also used to push some first party products) 1x would 1M in OAI sales counts as 1M in their Qtr/annual targets 0.5x would mean 500k and 5x means 5M quota would be retired for 1M in sales etc.
The way they work, you get a preferred price for various services at a substantial discount to list rate, but you commit to a guaranteed spend level for that period. The guaranteed spend is typically account-wide, but you have to pay a true-up at the end of the period if you fail to hit it.
It's a bit of calculus: will your growth increase enough such that, especially with the discount, you'll reach the minimum?
You can see these agreements littering 10-Qs, or similar, like when Snapchat filed their S-1 and revealed:
>When Snap originally filed for its IPO in 2017, it revealed a massive $2 billion commitment over five years ($400 million annually) with Google Cloud.
Yes; larger discounts with more commits, you also get some price guarantees on SKUs quite valuable these days and other benefits - like say premium support, architecture guidance, access to product teams and so forth.
Self-service retail buyers of cloud have access to some of these price advantages as well, 1-3 Year reservations(even paid monthly) are 40% cheaper of the bat after all. PAYG with fluctuating usage is quite more expensive than committed consumption for cloud.
Sergey better really go into "founder mode" or else Thomas Kurian (head of GCP) will continue to eat Deepmind's lunch.
Between selling TPUs to external companies and now hosting competitor models, Gemini just doesnt have the full faith of the Alphabet capital allocators, and I can't really blame them. A mature company like google would rather just expand their extremely profitable cloud business rather than dump billions into a black hole on the off chance they achieve RSI or superintelligence or whatever.
> Our cloud business is at any given moment in time forgoing short-term revenues because we are making compute trade-offs to support frontier AI development
> Our frontier AI business is at any given moment in time forgoing short-term development because we are making compute trade-offs to support our cloud business revenues.
Infact all companies, at all times are doing tradeoffs. You and I can be doing something else right now but I'm here on HN replying to you - and that's a tradeoff.
If someone suggests -just do X then you don't have to do a tradeoff, that just sounds wrong to me.
What does “capital allocators” mean here? If your implication is that the Gemini org is resource starved and a few extra dollars will put their model in the lead that is 100% incorrect. If anything it’s the bloat and bureaucracy keeping it behind.
Signing partnerships and hosting third party models costs Google nothing, and in fact brings in a ton of revenue that will eventually go back into Gemini.
Infra might very well be the right play. Over the past year, it seems like the evidence is on the side that there's no "secret sauce" in AI, and models will all converge towards similar capabilities. Not much margin to be had for having the best model for a month or less until another lab leapfrogs you by 3%.
Google uses Gemini for its AI Overview on Google Search results, though. And it seems to me that this is an area where they really have a big incentive to run their own AI that they completely control. AI Overview sits at the top of the Google Search results first page, so when it comes to marketing it's sitting in the most coveted place on the entire Internet.
It's also marketing that their AI is hilariously terrible because AI Overview is the biggest posterchild for AI slop and often used as an example of how bad Google is at AI. Gemini proper isn't that bad, just the ultra cost cutting version on search is.
> Enterprises with Google Cloud spend commitments will be able to draw down their GCP commitments for these purchases.
This is a fairly big move by Google... It means revenue they have already booked and reported to shareholders they now might have to give away - potentially all of it. Bean counters hate that!
No. It means customers can turn booked revenues into billed revenue by consuming OAI models on GCP (pass-through contracting). OAI will get their money, too, but Google will charge the customer for actual platform consumption. This was previously missing and GCP customers who wanted ChatGPT or Codex were limited to just making API calls from their GCP projects .
“Reported to shareholders” doesn’t really mean anything. There are thousands of such line items on financial reports. The ones that matter, such as recognized revenue, don’t count future bookings. It is understood that customers renege on these commitments all the time.
Google is simply telling customers - there’s a new Google Cloud service, and you can use it under your existing account.
That’s not the way it works. Google still recognizes the revenue. The cost of goods sold and gross profit are what get hit here but it’s no different than any other partner than can sell their product through the Google marketplace and take advantage of committed spend.
pretty sure that's what the "spend commitment" changes. It's a "use it or lose it" agreement. It's as good as a debt the moment it is signed, used or not.
GAAP does not permit booking contracted future revenue onto the balance sheet or income statement, because the spend is not actually an unconditional debt until the service has been rendered.
It doesn't matter if it's committed or not, it still won't be recognized on the formal financial statements.
RPO remaining performance obligations (not on balance sheet) unless prepaid then its deferred revenue (balance sheet). When it’s consumed it is recognized as revenue.
I don't understand all the wild speculation and question here - openai is selling a shit ton of inference through third parties. these third parties want to provide inference to their customers who use gcp (and don't want to also inference through bedrock or azure ai foundary.
these are all zdr engagements and thus "enterprise" contracts.
basically it boils down to - anthropic already provides inference direct through GCP, Azure, and AWS - so to compete openai is doing the same.
Does anyone still remember OpenAI’s founding? I had thought that OpenAI didn’t want to give the weights to Google because the original reason for its existence is to prevent Google from achieving AGI.
Google should just spin out DeepMind as an independent company and get out of the model building business: just sell tents and shovels as they say, and leave the actual (gold) mining to others.
Google Search is still a large fraction of Alphabet's revenue, and Alphabet needs to be able to deliver AI results for people's searches if it wants to stay relevant in the search game.
I imagine it's much easier to have fine grained control over AI search results if you develop and own the AI yourself.
Can you give an example of a search query with a terrible AI Overview? Or even better, a class of search queries that produce terrible AI Overviews? Would really appreciate it!
I was thinking about them fine-tuning the results for marketing purposes. But I just did a bit of research and it seems that would probably actually be illegal. So never mind, maybe?
This is speculation, but funnily enough Gemini models show the least evidence of being distilled from OAI or Anthropic compared to everything else in the market.
I feel this is correct. Google has probably the most data of any company in the world. For better or worse, they don't need to train on the outputs of other models.
At a org like Google Cloud barring rogue L5/6/7s acting on their own any sniffing of distillation will get leaked. Too many chaos exist at a org size of Google to systematically do it given the contract at hand. This is a company where every spicy memo or mild gossip will risk leaks.
Nvidia GPUs let you load encrypted weights onto them and to decrypt on chip so Google would need to have some sort of Nvidia management firmware attack to read from HBM while the GPU is live
I bet it would be the NVIDIA, at least initially, not for the encryption capability per se, but for simple fact that adapting to TPU at high performance is non-trivial.
You are vastly overestimating the power of publishers. The top book publisher in the US is worth $5 billion. All publishers together are about $50 billion. The New York Times is $11 billion. Fox is about $15-25 billion. Add together every single book publisher, newspaper, magazine, TV/radio, digital publisher and really every print and broadcasting platform in the country and you’d reach about $100-$150 billion. That is roughly 3% of Google.
These companies have a ton of cultural capital, sure, but in American capitalism that means nothing.
I don't believe threat of litigation alone explains the extent of it.
The way an American company, esp a reputable one like Google, conducts itself internally is different. There will be much more internal backlash to do the wrong thing way before litigation.
The strategy that I’ve heard said out loud now by all the major technology companies is “we’re all doing it (AI) together”
In my view this was more or less the political result of the White House summit
So I think we’re seeing what is basically going to be a giant amorphous set of collaborations such that nobody gets taken down, and the whole market doesn’t collapse
If Alphabet, OAI, MSFT, AMZ…etc all agree to be interoperable then they will be acting more or less as a single body in tension.
Whether that’s good or not is a question of your worldview but I think that’s the strategy
Giant companies working together isn’t an AI-age phenomenon. Go back 10, 20, 30 years and you’ll see that despite the public perception of competitiveness all the largest tech companies (Apple, Microsoft, Google, Samsung, Amazon) buy/sell to each other, sign partnerships and have tight economic interdependencies.
Why would it? The point of Gemini is provide user facing services cheaper than if they were paying OpenAI, make some money on the side with API credits and position themselves as a leader when investors want to see AI everywhere.
Google Cloud is competing with AWS. Amazon has Bedrock so Google needs to keep up with them by serving both Claude and GPT, along with Gemini and open models.
Prediction: google cloud will pivot to being a hyperscaler versus a model + hyperscaler. Kind of like how xAI started hosting anthropic workloads with colossus cluster.
bc the alpha is not the model, the alpha is having the physical infra (chips, power, etc).
But x.ai also hosts Grok? Why would google stop developing their own models? I think you're right that Google will try to make money from their infrastructure (that's basically what Google Cloud is too).
>Kind of like how xAI started hosting anthropic workloads with colossus cluster.
Google has been hosting part of Anthropic's load long before that deal. They had a big degradation due to compiler bug for TPUs in an optimization they made to work around TPUs not being able sample from the logits efficiently.
OpenAI sells and reaches enterprise customers via GCP.
Enterprises want zero data retention guarantees and they're already on AWS or GCP, so this is how OpenAI reaches those customers and makes more money.
* By "enterprise" here I mean "big company that is not a tech company". If most of your userbase is carrying a mac, you're probably a tech company. If you're mostly making widgets in factories, chances are high Windows and the ecosystem around it is involved.
If you have a Thinkpad, you have a real job. And if you have a MacBook, you have a fake job.
These are the companies running SAP and Oracle. It can run anywhere, including GCP and AWS.
> Enterprises with Google Cloud spend commitments will be able to draw down their GCP commitments for these purchases.
Meaning they can swap out compute/storage spends on GCP to LLM model spend or use left over budget ( which would go waste anyway ) and so on . Any OpenAI sales by GCP teams would be considered against their quota typically in this type of arrangement [2]
This is normally not done to third party[1] marketplace services, Azure already does this for OpenAI, it helps drive some enterprise spends as it is from for fungible budgets or different approving authority internally in a org when it is not a new vendor, new budget etc.
----
[1] It is not too hard to get into these types of programs i.e. it not only for OpenAI level partners mid sized startups can also be part of these deals in marketplace, the requirement usually is minimum size and the partner having to prove/show that are spending that customer's revenue on the compute etc so money is going back to them, then AWS/Azure/GCP will consider an org for this type of program.
Given that GCP is hosting these models on their cloud and therefore OpenAI is spending a % of every dollar back on GCP for every token sold like this; it wouldn't have been too hard for OpenAI to got such a program even if they were a mid sized startup.
[2] Multiples maybe involved (also used to push some first party products) 1x would 1M in OAI sales counts as 1M in their Qtr/annual targets 0.5x would mean 500k and 5x means 5M quota would be retired for 1M in sales etc.
Thanks for you reply, it was very enlightening
It's a bit of calculus: will your growth increase enough such that, especially with the discount, you'll reach the minimum?
You can see these agreements littering 10-Qs, or similar, like when Snapchat filed their S-1 and revealed:
>When Snap originally filed for its IPO in 2017, it revealed a massive $2 billion commitment over five years ($400 million annually) with Google Cloud.
Self-service retail buyers of cloud have access to some of these price advantages as well, 1-3 Year reservations(even paid monthly) are 40% cheaper of the bat after all. PAYG with fluctuating usage is quite more expensive than committed consumption for cloud.
Between selling TPUs to external companies and now hosting competitor models, Gemini just doesnt have the full faith of the Alphabet capital allocators, and I can't really blame them. A mature company like google would rather just expand their extremely profitable cloud business rather than dump billions into a black hole on the off chance they achieve RSI or superintelligence or whatever.
Sundar Pichai just this week.
https://finance.yahoo.com/technology/ai/articles/google-ceo-...
> Our frontier AI business is at any given moment in time forgoing short-term development because we are making compute trade-offs to support our cloud business revenues.
Infact all companies, at all times are doing tradeoffs. You and I can be doing something else right now but I'm here on HN replying to you - and that's a tradeoff.
If someone suggests -just do X then you don't have to do a tradeoff, that just sounds wrong to me.
Signing partnerships and hosting third party models costs Google nothing, and in fact brings in a ton of revenue that will eventually go back into Gemini.
For a lot of folks, something low cost and low intelligence is what they want. And for a few that needs high intelligence, there's stronger models.
Google has both bases covered. It is brilliant.
This is a fairly big move by Google... It means revenue they have already booked and reported to shareholders they now might have to give away - potentially all of it. Bean counters hate that!
Google is simply telling customers - there’s a new Google Cloud service, and you can use it under your existing account.
It doesn't matter if it's committed or not, it still won't be recognized on the formal financial statements.
these are all zdr engagements and thus "enterprise" contracts.
basically it boils down to - anthropic already provides inference direct through GCP, Azure, and AWS - so to compete openai is doing the same.
I imagine it's much easier to have fine grained control over AI search results if you develop and own the AI yourself.
If I were google there's no way I'd leave their AI overviews in place as-is.
These companies have a ton of cultural capital, sure, but in American capitalism that means nothing.
The way an American company, esp a reputable one like Google, conducts itself internally is different. There will be much more internal backlash to do the wrong thing way before litigation.
Google, NVIDIA, OpenAI, MSFT…
GNOM…oh wait no
The strategy that I’ve heard said out loud now by all the major technology companies is “we’re all doing it (AI) together”
In my view this was more or less the political result of the White House summit
So I think we’re seeing what is basically going to be a giant amorphous set of collaborations such that nobody gets taken down, and the whole market doesn’t collapse
If Alphabet, OAI, MSFT, AMZ…etc all agree to be interoperable then they will be acting more or less as a single body in tension.
Whether that’s good or not is a question of your worldview but I think that’s the strategy
However if you look at the trust busting era what preceded it was this exact kind of private “cooperation” to prevent government involvement
MOM-NG GNOMM NGMOM MGNOM MGMNO MGMON ONMGM NOMGM NOMMG
Google Cloud is competing with AWS. Amazon has Bedrock so Google needs to keep up with them by serving both Claude and GPT, along with Gemini and open models.
They definitely need to have a better name if they're going to use 3p models
bc the alpha is not the model, the alpha is having the physical infra (chips, power, etc).
Google has been hosting part of Anthropic's load long before that deal. They had a big degradation due to compiler bug for TPUs in an optimization they made to work around TPUs not being able sample from the logits efficiently.