Morgan Stanley: OpenAI collaboration highlights Alphabet Inc. Class C (GOOGL.US) AI chip capabilities.

Morgan Stanley stated that OpenAI, supported by Microsoft Corporation (MSFT.US), may use Alphabet Inc. Class C's Tensor Processing Units (TPUs) to perform inference work for its artificial intelligence (AI) tasks, which would be a strong endorsement of Alphabet Inc. Class C's hardware technology. The use of Alphabet Inc. Class C TPUs marks OpenAI's diversification of suppliers, as OpenAI has previously relied on NVIDIA Corporation's chips to train its AI models and perform inference calculations, which is the process of executing the model after training is completed. An analyst team at Morgan Stanley led by Brian Nowak stated, "Earlier reports indicated that OpenAI and Alphabet Inc. Class C were finalizing an agreement for OpenAI to use Alphabet Inc. Class C's cloud computing power. The latest reports suggest that as part of the agreement, OpenAI will also lease Alphabet Inc. Class C's TPUs to support its inference workloads. Meanwhile, OpenAI is striving to meet its growing inference demands while controlling costs. It is worth noting that OpenAI will not be able to use Alphabet Inc. Class C's most powerful TPUs, as these TPUs have been reserved by Alphabet Inc. Class C for training their own Gemini model." Morgan Stanley believes that this deal is expected to drive rapid growth in Alphabet Inc. Class C's cloud business and enhance market confidence in Alphabet Inc. Class C's AI chips. Nowak stated, "We believe OpenAI is the most notable TPU customer to date, with other customers including Apple Inc. (AAPL.US), Safe Superintelligence, and Cohere. This agreement represents a significant endorsement of Alphabet Inc. Class C's AI infrastructure capabilities developed over the past decade. This is also the first time OpenAI is using non-NVIDIA Corporation chips in a meaningful way, particularly noteworthy that despite not being able to use the most advanced Alphabet Inc. Class C TPUs, the company still chose to partner with Alphabet Inc. Class C, demonstrating once again Alphabet Inc. Class C's leading position in the wider Application-Specific Integrated Circuit (ASIC) ecosystem." However, Morgan Stanley noted that due to high demand and limited supply, NVIDIA Corporation's GPU supply may be constrained, which could be one of the reasons why OpenAI decided to use Alphabet Inc. Class C TPUs. Morgan Stanley also mentioned that OpenAI's decision is not favorable for Amazon.com, Inc. (AMZN.US) and their custom Trainium chips. Nowak added, "If OpenAI partners with Alphabet Inc. Class C, OpenAI will run AI workloads on most major cloud providers including Alphabet Inc. Class C Cloud, Microsoft Corporation Azure, Oracle Corporation (ORCL.US), and CoreWeave (CRWV.US) with Amazon.com, Inc. being the only major player absent from the list." He further stated, "Of note, reports indicate that OpenAI chose to use the previous generation TPU instead of Trainium."