This Monster Artificial Intelligence (AI) Data Center Stock Is the Real Winner From Google's Deal with OpenAI (Hint: It's Not Nvidia)

OpenAI is expanding its cloud infrastructure beyond Microsoft Azure by partnering with Google Cloud Platform (GCP), a move that benefits Alphabet's cloud business. CoreWeave (CRWV), which provides cloud-based GPU infrastructure, is positioned to gain significantly from this partnership, as it will supply compute power to Alphabet for resale to OpenAI; CoreWeave recently signed an $11.2 billion deal with OpenAI. Despite a bullish outlook and a nearly 300% stock price gain in two months, CoreWeave's IPO status and rapid growth suggest the stock may be currently overbought.

Analysis

OpenAI's strategic decision to incorporate Google Cloud Platform (GCP) for compute resources, alongside its existing primary provider Microsoft Azure, signals a significant development in the AI infrastructure landscape. This diversification is a notable win for Alphabet, enhancing GCP's competitive posture against Azure and Amazon Web Services, particularly in the high-demand AI workload segment. A key, and perhaps less obvious, beneficiary of this expanded partnership is CoreWeave (CRWV), a cloud-based GPU infrastructure provider. CoreWeave is reportedly set to supply compute power to Alphabet, which will then be resold to OpenAI, building upon CoreWeave's direct $11.2 billion deal with OpenAI announced in March. This arrangement underscores the burgeoning demand for specialized AI infrastructure services, evidenced by CoreWeave's 63% increase in remaining performance obligations (RPO). Despite a highly bullish Wall Street consensus, projecting a tripling of revenue and a shift to profitability within a few years, CoreWeave's recent IPO status and a nearly 300% stock price appreciation in just two months suggest the stock is currently in overbought territory, warranting careful consideration of entry points.

Key Decisions for Investors

• Investors should monitor CoreWeave (CRWV) for a potential pullback before considering new positions, despite its strong long-term growth prospects driven by its pivotal role in AI infrastructure and significant contracts with OpenAI and Google.
• The OpenAI partnership with Google Cloud Platform reinforces a positive outlook for Alphabet's (GOOGL, GOOG) cloud segment, potentially adding a catalyst for growth in this competitive market.
• For Microsoft (MSFT), OpenAI's diversification, while not immediately detrimental given the scale of their existing partnership, signals increased competition for Azure's AI compute business and should be monitored for its long-term impact on Azure's growth trajectory with this key client.