Alphabet is partnering with Blackstone, the asset manager, to form an AI cloud business aiming to corner the market on growing computing demand as AI booms.

The deal will see Blackston investing $5 billion in equity to Google initially, bringing in 500 megawatt of data centre capacity by 2027. Expansion on both these fronts is planned as well.

The new venture will provide data centre capacity, as well as Google’s own custom AI chips, positioning itself as a compute-as-a-service model.

According to reports from Bloomberg, the total investment could reach $25 billion.

The new firm’s CEO will be Benjamin Sloss, a Google executive.

The new venture aims to meet skyrocketing demand for AI chips – known as Tensor Processing Units (TPUs) – by offering a centralised service for accessing the full scope for compute, from data centres to chips.

Google has been successful in the market so far, attracting big ticket customers like Anthropic with its custom AI chips and business stack.

But the cloud and AI chip sphere is highly competitive – from AWS and Microsoft dominate overall cloud deployments, and NVIDIA continues to see its shares skyrocket as it triumphs in the AI chip race.

Despite fear that the AI bubble may burst, Blackstone has increased investments into AI infrastructure, from data centres to energy generation.

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Spending in AI has transformed from investing and major deals with firms developing frontier models to funding in the infrastructure backing AI, from updating energy grids to outfitting new data centres.

These require not only large influxes of up front investment for construction, but supply chain coordinate and often, government and public backing.

While the UK as classified data centres as critical national infrastructure, concerns over their impact on the local environment, the wider climate, and energy demand, has seen local councils hesistant to approve data centre building plans in the country.