Google and Blackstone to launch $5bn AI cloud company - reports

(Sharecast News) - Google and Blackstone plan to launch a new artificial intelligence cloud company backed by an initial $5bn equity investment, it was reported overnight on Tuesday, as demand for computing capacity continues to surge across the AI industry.

The US-based venture would offer data centre capacity, operations, networking and Google Cloud's Tensor Processing Units, or TPUs, through a compute-as-a-service model. It is expected to bring 500 megawatts of capacity online in 2027, with further expansion planned over time. Including leverage, the total investment could reach about $25bn.

The deal, first reported by the Wall Street Journal, would mark Google's biggest step yet to commercialise its in-house AI chips for external customers and would put the new company in competition with so-called neocloud providers such as CoreWeave and Nebius, many of which rely on Nvidia graphics processing units.

Google would supply hardware, including TPUs, as well as software and services, while Blackstone woul;d be the majority owner, according to people familiar with the matter cited by the Journal.

The venture would be led by Benjamin Treynor Sloss, a longtime Google executive.

Thomas Kurian, chief executive of Google Cloud, said the partnership would help meet growing demand for TPUs by giving organisations additional ways to access computing capacity.

The companies were forming the business as AI developers and large technology groups compete for access to power, chips and data centres.

Big tech capital expenditure on AI infrastructure was expected to exceed $700bn this year, while private asset manager Ares estimated the opportunity in third-party data centres alone at about $900bn.

Blackstone had become one of the most active investors in AI infrastructure.

The firm, which manages more than $1.3trn of assets, described itself as the world's largest global provider of data centres and already owns QTS and AirTrunk.

It also has investments in CoreWeave, Anthropic, OpenAI and SpaceX, which owns xAI.

Blackstone chairman and chief executive Stephen Schwarzman said recently that the firm had more than $150bn of data-centre assets, including sites under construction, with a further $160bn of potential new projects.

The Google venture was being made through Blackstone's new AI-focused unit, Blackstone N1, or BXN1.

For Google, the transaction highlighted growing competition between Nvidia and large cloud providers developing their own chips.

Google had already signed major TPU deals with Anthropic and Meta, while Amazon had been expanding its own Trainium chip business through AWS.

Reporting by Josh White for Sharecast.com.