Google Gave Up on Frontier AI. Here Is Who Benefits

SemiAnalysis, concluded that Google’s DeepMind is no longer a frontier AI lab.

• The well-respected industry analyst firm cited mass departures from DeepMind’s reinforcement learning teams and poor internal compute allocation

• Jeff Dean, Sanjay Ghemawat, Quoc Le, and Oriol Vinyals left in recent weeks. Noam Shazeer moved to OpenAI. John Jumper moved to Anthropic

• SemiAnalysis says Google’s odds of reaching state-of-the-art model performance again have “dropped to zero”

• The firm says the real winner is Google Cloud, not Anthropic or OpenAI

AI models and applications are inputs into that battle. Hyperscalers compete on cloud volume and vendor lock-in, not AI model supremacy alone. Google joins AWS and Microsoft of having their own closed AI models but not the SOTA models.

Google appears to agree. It is directing AI investment toward Google Cloud growth rather than frontier model development. Google Cloud grew 82% last quarter to $25 billion in revenue. SemiAnalysis frames this as a deliberate trade, not a failure.

Developing SOTA AI models is not the top priority at Google to drive Google Cloud revenue, in part there remains so much economic opportunity for AI automation with the existing models which are already more than adequate.

Implications for AI leaders

• Keep refining your “Own Your Own Intelligence” strategy. Protect the processes that create your real competitive edge (drug discovery, trading algorithms, due diligence) from hyperscaler lock-in

• Watch Google Cloud’s pricing. Its position as a lower-cost provider of closed models may sharpen further

• Keep using top-tier frontier models from Anthropic and OpenAI where performance matters most. Expect future SOTA models to continue to face export controls and national security scrutiny similar to military-grade technology

• Keep testing leading open-weight models, including Chinese models, for select internal processes

• Think through what business impact your face if you are prevented from getting the latest SOTA AI model, either because of US export controls, vendors only providing the best models to certain customers, or the most advanced Chinese open-weight models going to country and companies selected by China
  

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Onward,
Paul

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