Google Cloud collaborates with OpenAI, Morgan Stanley: This is significant for Google investors

Wall Street Journal previously mentioned, media reports have revealed that OpenAI has reached a cooperation agreement with Google last month, with Google Cloud providing computing power for OpenAI to train and run models. Previously, cooperation could not be achieved due to OpenAI's lock-in agreement with Microsoft. Before January of this year, Microsoft was OpenAI's exclusive cloud service provider.

According to news from the Wind Trading Desk, Morgan Stanley analyst Brian Nowak and his team recently released a research report stating that the cooperation agreement between Google Cloud and OpenAI is significant, mainly reflected in two aspects: First, it is expected to drive accelerated growth for Google Cloud, which is currently not fully valued at about 18 times the expected price-to-earnings ratio for 2026; second, it sends an important signal that Google is confident in its long-term search position.

The report speculates that although it has not been confirmed whether OpenAI will use TPU or GPU, it is more likely to rely on Google's GPU to meet computing capacity needs. This way, OpenAI can maintain consistency across the entire infrastructure, avoid vendor lock-in, and engineers do not need to familiarize themselves with new chip architectures.

Google Cloud May Welcome New Growth Momentum

The report points out that for Google, this cooperation could be an important turning point for Google Cloud's business.

Currently, Google Cloud's annualized revenue is approaching $50 billion, maintaining a growth rate of 20% to 30% over the past two years. However, compared to Amazon's AWS and Microsoft's Azure, its market share and growth rate have not shown sustained overwhelming advantages—and if OpenAI's involvement is substantial, it could become a catalyst for accelerating growth for Google Cloud.

The report believes that based on Google's current stock price corresponding to an expected price-to-earnings ratio of about 18 times for 2026, the market has not fully given Google Cloud the valuation premium it deserves.

The report adds that as Google's chip production capacity constraints ease in the second half of the year, this could become a driving force for faster and more sustainable growth for Google Cloud. This is a potential benefit that has not been fully priced in for investors.

Although the terms and scale of this potential cooperation have not been disclosed, analysts expect that as the generative AI inference phase continues to develop, OpenAI will require increasingly more capacity. For reference, earlier this year, OpenAI signed a $11.9 billion agreement with CoreWeave (including a $350 million equity investment) and recently extended that agreement by an additional $4 billion.

Google is Confident in Its Search Position

The deeper significance is that this cooperation may reflect Google's internal confidence in the long-term competitiveness of its core search business.

For a long time, investors have been concerned about whether products like OpenAI's ChatGPT will disrupt Google's dominant position in search.

The report sharply points out, If Google were truly worried about its search business being threatened, would it be willing to provide critical computing power to potential competitors? The answer seems to be no. This indicates that Google understands the health of its business better than anyone outside, and it is confident in its user base, data assets, and pace of innovation The report further points out that compared to OpenAI, Meta's AI products may pose a greater structural threat to Google's search business, but Meta AI still needs to prove its commercialization capabilities