Nvidia buys AI chip startup Groq for around $20 billion, largest deal

Nvidia has agreed to buy assets of Groq, a designer of high-performance artificial intelligence accelerator chips, for $20 billion in cash, according to Disruptive CEO Alex Davis, who led the startup’s latest project. financing cycle in September.

Davis, whose company has invested more than half a billion dollars in Groq since the company’s founding in 2016, said the deal came together quickly. Groq raised $750 million at a valuation of around $6.9 billion three months ago. Investors participating in the round included Blackrock and Neuberger Berman, as well as Samsung, CiscoAltimeter and 1789 Capital, where Donald Trump Jr. is a partner.

Groq said in a blog post On Wednesday, it “entered into a non-exclusive licensing agreement with Nvidia for Groq’s inference technology,” without disclosing pricing. With the deal, Groq founder and CEO Jonathan Ross, along with Sunny Madra, the company’s president, and other senior executives “will join Nvidia to help advance and scale the licensed technology,” the post said.

Groq added that it would continue to be an “independent company”, led by finance director Simon Edwards as CEO.

Colette Kress, Nvidia’s chief financial officer, declined to comment on the transaction.

Davis told CNBC that Nvidia would get all of Groq’s assets, although its nascent Groq cloud business would not be part of the deal. Groq said: “GroqCloud will continue to operate without interruption. »

This deal represents by far the largest purchase Nvidia has ever made. The chipmaker’s biggest acquisition to date came in 2019, when it bought the Israeli chip designer. Mellanox for almost 7 billion dollars. At the end of October, Nvidia had $60.6 billion in species and short-term investments, compared to $13.3 billion at the start of 2023.

In an email to employees obtained by CNBC, Nvidia CEO Jensen Huang said the deal would expand Nvidia’s capabilities.

“We plan to integrate Groq’s low-latency processors into the NVIDIA AI Factory architecture, extending the platform to serve an even wider range of AI inference and real-time workloads,” Huang wrote.

Huang added: “While we add talented employees to our ranks and license Groq’s intellectual property, we are not acquiring Groq as a company.

Nvidia orchestrated a similar but smaller deal in September, when it paid more than $900 million to hire Enfabrica CEO Rochan Sankar and other employees from the AI ​​hardware startup, and to license the company’s technology, CNBC. reported at the time.

Other tech giants, including MetaGoogle and Microsofthave spent a lot of money over the past couple of years to hire top AI talent through various types of licensing deals.

Nvidia has ramped up its investments in chip startups and the broader ecosystem as its cash flow has grown. The company backed AI and energy infrastructure company Crusoe, AI model developer Cohere, and increased investments in CoreWeave as the AI-centric cloud provider prepared to go public this year.

In September, Nvidia said so destined investing up to $100 billion in OpenAI, with the startup pledging to deploy at least 10 gigawatts of Nvidia products. The companies have not yet announced a formal agreement. The same month, Nvidia announced that it would invest $5 billion in Intel within the framework of a partnership.

Groq is targeting $500 million in revenue this year amid growing demand for AI accelerator chips used to speed up the process of enabling large language models to perform inference-related tasks. The company wasn’t looking to sell when it was approached by Nvidia, Davis said.

Groq was based in 2016 by a group of former engineers, including Ross. He was one of the creators of Google tensor processing unit, or TPU, the search giant’s custom chip that is used by some companies as an alternative to Nvidia’s graphics processing units.

In its initial version deposit with the SEC, announcing a fundraising of $10.3 million at the end of 2016, Groq named as directors Ross and Douglas Wightman, entrepreneur and former engineer of the “moonshot factory” of Google X. Wightman left Groq in 2019, according to his LinkedIn profile.

Groq isn’t the only chip startup to gain traction during the AI ​​boom.

AI chipmaker Cerebras Systems had planned to go public this year, but withdrew its IPO in October after announcing it had raised more than $1 billion in a fundraising round.

In an SEC filing, Cerebras said it does not intend to proceed with a proposed offering “at this time” but did not provide a reason. A spokesperson told CNBC at the time that the company still hoped to go public as quickly as possible.

Cerebral filed for an IPO at the end of 2024, as it accelerated to take over Nvidia with the aim of creating processors to run generative AI models.

—Jordan Novet of CNBC contributed to this report.

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