Nvidia has been reported to acquire assets of Groq, a high-performance artificial intelligence accelerator chip developer, in a deal worth $20 billion in cash, according to Alex Davis, CEO of Disruptive, which spearheaded the latest financing round of the startup in September.
Davis, who has spent more than half a billion dollars of his company, Groq, since the establishment of the company in 2016, said that the deal materialized fast. Groq increased $750 million at a valuation of about $6.9 billion three months ago.
Various investors in the round were BlackRock and Neuberger Berman, Samsung, Cisco, Altimeter, and 1789 Capital, among others, with Donald Trump Jr. as a partner.
Groq announced in a blog post on Wednesday that it’s “entered into a non-exclusive licensing agreement with Nvidia for Groq’s inference technology,” without disclosing a price.
The post reported that under the deal, Groq founder and CEO Jonathan Ross and Sunny Madra, the company president, and other top executives “will join Nvidia to help advance and scale the licensed technology.”
Groq further indicated that it would lead “independent company,” led by finance chief Simon Edwards as CEO. Colette Kress, Nvidia’s CFO, declined to comment on the transaction.
Davis informed CNBC that Nvidia is acquiring all of Groq’s assets, but its fledgling Groq cloud company is excluded from the deal. Groq said, “GroqCloud will continue to operate without interruption.”
However, the acquisition is the biggest acquisition in the history of Nvidia. The chipmaker’s largest acquisition to date came in 2019, when it bought Israeli chip designer Mellanox for close to $7 billion.
By the end of October, Nvidia had $60.6 billion in cash and short-term investments, up from $13.3 billion in early 2023. NVIDIA CEO Jensen Huang wrote in an email to employees that was received by CNBC that the deal will broaden the company’s abilities.
Huang wrote, “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 stated that, “While we are adding talented employees to our ranks and licensing Groq’s IP, we are not acquiring Groq as a company.”
CNBC reported that Nvidia staged a smaller but comparable acquisition in September, where it disbursed in excess of 900 million dollars to recruit Enfabricas CEO Rochan Sankar and the other staff at the AI equipment maker, and also purchased the company’s technology of the company.
Other technology giants, such as Meta, Google, and Microsoft, in the past two years have spent a lot of money to attract the best minds in AI by engaging them under different forms of licensing agreements.
With a growing cash pile, Nvidia has increased its investments in chip startups and the wider ecosystem. The firm has invested in AI and energy infrastructure business Crusoe, AI framework designer Cohere, and increased its investment in CoreWeave, the AI-focused cloud supplier, as the firm prepared to go public this year.
Nvidia announced plans to invest up to $100 billion in OpenAI in November, and the startup also agreed to install at least 10 gigawatts of Nvidia products. The companies have yet to announce a formal deal. In the same month, Nvidia announced that it would make a partnership with Intel by investing $5 billion.
Groq has been aiming to achieve a revenue of $500 million this year with a soaring demand for AI accelerator chips that are used to accelerate the process of large language models to accomplish inference-related tasks.
Davis stated that the company was not pursuing a sale when it was approached by Nvidia. Groq was founded in 2016 by a group of former engineers, including Ross.
He was also among the creators of Google’s tensor processing unit, or TPU, the search giant’s own chip that is already being utilized by certain companies as an alternative to the graphics processing units promoted by Nvidia.
Groq, which announced in its first SEC filing a $10.3 million raise at the end of 2016, was named as principals Ross and Douglas Wightman, an entrepreneur and former Google X engineer at the “moonshot factory.” His LinkedIn profile shows that Wightman departed Groq in 2019.
Therefore, the Groq is not the only chip startup to have gained momentum in the AI boom. AI chipmaker Cerebras Systems had intended to IPO this year but pulled its filing in October after declaring it had raised more than $1 billion in a fundraising round.
As part of a filing with the SEC, Cerebras indicated that it is not planning to hold a proposed offering, although it did not give a reason. A spokesperson reported to CNBC that the company remains hopeful to go public at the earliest.
Cerebras announced an IPO in 2024, as it was gearing up to compete with Nvidia in an attempt to design processors to execute generative AI models.
