Nvidia Strikes $20 Billion AI Deal with Groq
Nvidia has reached an agreement to acquire essential assets from Groq, a startup specializing in high-performance artificial intelligence accelerator chips, in a cash transaction valued at $20 billion, according to a source. Alex Davis stated that the agreement was reached swiftly despite Groq not being actively in the market to sell. Disruptive has invested over $500 million in Groq since the company’s inception in 2016. Three months ago, Groq secured $750 million at a valuation of approximately $6.9 billion. The funding round attracted a range of investors, including BlackRock, Neuberger Berman, Samsung, Cisco, Altimeter, and 1789 Capital. Donald Trump Jr. serves as a partner at 1789 Capital.
Groq confirmed the agreement on Wednesday, stating it has “entered into a non-exclusive licensing agreement with Nvidia for Groq’s inference technology.” In the agreement, Groq founder and chief executive Jonathan Ross, along with company president Sunny Madra and other senior leaders, “will join Nvidia to help advance and scale the licensed technology,” as stated by the company. Groq stated that it will maintain its status as an independent entity, with finance chief Simon Edwards stepping in as chief executive. Davis informed that Nvidia is purchasing all of Groq’s assets, with the exception of its cloud business. Groq has confirmed that “GroqCloud will continue to operate without interruption.”
The transaction represents Nvidia’s largest deal to date. The company’s largest acquisition prior to this was in 2019, when it acquired Israeli chipmaker Mellanox for nearly $7 billion. Nvidia’s balance sheet has significantly improved in recent years. At the close of October, the company reported $60.6 billion in cash and short-term investments, a significant increase from $13.3 billion at the beginning of 2023, as per reports. Nvidia chief executive Jensen Huang stated that the deal would enhance the company’s AI offerings. “We plan to integrate Groq’s low-latency processors into the NVIDIA AI factory architecture, extending the platform to serve an even broader range of AI inference and real-time workloads,” Huang wrote. He stated, “While we are adding talented employees to our ranks and licensing Groq’s IP, we are not acquiring Groq as a company.”
Groq was established in 2016 by a group of former engineers, including Ross, who played a pivotal role in the development of Google’s tensor processing unit. The company aims to achieve $500 million in revenue this year, fueled by robust demand for AI inference chips. The Groq deal marks another strategic maneuver by Nvidia in this arena. In September, the company allocated over $900 million to recruit personnel and acquire technology from AI hardware startup Enfabrica. Other technology giants like Meta, Google, and Microsoft have similarly depended on licensing agreements and talent acquisitions to enhance their AI capabilities. Nvidia has broadened its investments within the AI ecosystem, supporting companies like Crusoe and Cohere while also enhancing its stake in CoreWeave. In September, Nvidia announced its intention to invest up to $100 billion in OpenAI and $5 billion in Intel, although formal agreements are still pending.
