Google Cloud’s Bet on AI Startups: A Strategic Move to Capture the Next Generation of AI Companies

The unprecedented $100 billion partnership between Nvidia and OpenAI, announced this week, signifies the latest mega-deal reshaping the AI infrastructure sector. This alliance encompasses non-voting shares linked to substantial chip purchases and computing power sufficient for more than 5 million U.S. households, further solidifying the bond between two of the most influential players in artificial intelligence (AI).

Meanwhile, Google Cloud is pursuing a unique strategy. While industry giants forge ever-closer partnerships, Google Cloud aims to capture emerging AI companies before they become too large to court.

Francis deSouza, its COO, has witnessed the AI revolution from multiple perspectives. As the former CEO of genetics powerhouse Illumina, he observed how machine learning transformed drug discovery. As co-founder of a two-year-old AI alignment startup, Synth Labs, he grappled with the safety challenges posed by increasingly advanced models. Now, having joined Google Cloud’s executive suite in January, deSouza is orchestrating a significant wager on AI’s second wave.

DeSouza often prefers to tell the story using numbers. During a recent conversation with this editor, he frequently highlighted that nine out of the top 10 AI labs utilize Google’s infrastructure. He also stated that nearly all generative AI unicorns operate on Google Cloud, that 60% of all gen AI startups worldwide have chosen Google as their cloud provider, and that the company has secured $58 billion in new revenue commitments over the next two years—representing more than double its current annual run rate.

When asked about the percentage of Google Cloud’s revenue generated from AI companies, he offered instead that “AI is resetting the cloud market, and Google Cloud is leading the way, particularly with startups.”

The Nvidia-OpenAI deal exemplifies the scale of consolidation sweeping AI infrastructure. Microsoft’s initial $1 billion investment in OpenAI has grown to nearly $14 billion. Amazon followed suit with an $8 billion investment in Anthropic, securing deep hardware customizations that optimize AI training for Amazon’s infrastructure. Oracle has surprised many by landing a $30 billion cloud deal with OpenAI and then securing a staggering $300 billion five-year commitment starting in 2027.

Even Meta, despite building its own infrastructure, signed a $10 billion deal with Google Cloud while planning $600 billion in U.S. infrastructure investments through 2028. The Trump administration’s $500 billion “Stargate” project, involving SoftBank, OpenAI, and Oracle, adds another layer to these interlocking partnerships.

These massive deals might initially appear threatening for Google, given the partnerships that companies like OpenAI and Nvidia seem to be cementing elsewhere. However, it appears that Google Cloud is not idle. Instead, it is signing smaller companies like Loveable and Windsurf—companies deSouza refers to as the “next generation of companies emerging”—as “primary computing partners” without requiring substantial upfront investments.

This approach reflects both opportunity and necessity. In a market where companies can go from being startups to multi-billion-dollar enterprises in a short time, capturing future unicorns before they mature could prove more valuable than fighting over today’s giants.

The strategy extends beyond simple customer acquisition. Google offers AI startups $350,000 in cloud credits, access to its technical teams, and go-to-market support through its marketplace. Google Cloud also provides what deSouza describes as a “no compromise” AI stack—from chips to models to applications—with an “open ethos” that offers customers choice at every layer.

“Companies value the fact that they can access our AI stack, they can access our teams to understand where our technologies are heading,” deSouza notes during our interview. “They also appreciate the enterprise-grade Google infrastructure.”

This infrastructure advantage became more apparent this month when reports emerged about Google’s behind-the-scenes efforts to expand its custom AI chip business. According to The Information, Google has struck deals to place its tensor processing units (TPUs) in other cloud providers’ data centers for the first time, including an agreement with London-based Fluidstack that includes up to $3.2 billion in financial backing for a New York facility.

Competing directly with AI companies while simultaneously providing them infrastructure requires finesse. Google provides TPU chips to OpenAI and hosts Anthropic’s Claude model through its Vertex AI platform, even as its own Gemini models compete head-to-head with both. (Its parent company, Alphabet, also owns a 14% stake in Anthropic, according to New York Times court documents obtained earlier this year; however, when asked directly about Google’s financial relationship with Anthropic, deSouza refers to it as a “multi-layered partnership” before quickly redirecting to Google Cloud’s “model garden,” noting that customers can access various foundation models.)

Google Cloud’s courtship of startups comes at a particularly interesting juncture. Just this month, federal judge Amit Mehta delivered a nuanced ruling in the government’s five-year-old search monopoly case, attempting to curb Google’s dominance without hampering its AI ambitions.

While Google avoided the Justice Department’s most severe proposed penalties, including the forced divestment of its Chrome browser, the ruling underscored regulatory concerns about the company leveraging its search monopoly to dominate AI. Critics are concerned that Google’s vast trove of search data provides an unfair advantage in developing AI systems and that the company could deploy the same monopolistic tactics that secured its search dominance.

In conversation, deSouza is focused on more positive outcomes. “I think we have an opportunity to fundamentally understand some of the major diseases that today we just don’t have a good understanding of,” deSouza explains, outlining a vision where Google Cloud powers research into Alzheimer’s, Parkinson’s, and climate technologies. “We want to work very hard to make sure that we are pioneering the technologies that will enable that work.”

Critics may find it challenging to be appeased. By positioning itself as an open platform that empowers rather than controls the next generation of AI companies, Google Cloud may be demonstrating to regulators that it fosters competition rather than stifles it, all while forging relationships with startups that might help Google’s case if regulators ramp up pressure.