Nvidia buying AI chip startup Groq for about $20 billion, biggest deal

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

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

Groq said 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. With the deal, Groq founder and CEO Jonathan Ross along with Sunny Madra, the company’s president, and other senior leaders “will join Nvidia to help advance and scale the licensed technology,” the post said.

Groq added that it will continue as an “independent company,” led by finance chief Simon Edwards as CEO.

Colette Kress, Nvidia’s CFO, declined comment on the transaction.

Davis told CNBC that Nvidia is getting all of Groq’s assets, though its nascent Groq cloud business is not part of the transaction. Groq said “GroqCloud will continue to operate without interruption.”

The deal represents by far Nvidia’s largest purchase ever. The chipmaker’s biggest acquisition to date came in 2019, when it bought Israeli chip designer Mellanox for close to $7 billion. At the end of October, Nvidia had $60.6 billion in cash and short-term investments, up from $13.3 billion in early 2023.

In an email to employees that was obtained by CNBC, Nvidia CEO Jensen Huang said the agreement will 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 broader range of AI inference and real-time workloads,” Huang wrote.

Huang added that, “While we are adding talented employees to our ranks and licensing Groq’s IP, we are not acquiring Groq as a company.”

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

Other tech giants, including Meta, Google and Microsoft, have spent heavily over the last couple 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 pile has mounted. The company has backed AI and energy infrastructure company Crusoe, AI model developer Cohere, and boosted its investment in CoreWeave as the AI-centric cloud provider was getting ready to go public this year.

In September, Nvidia said it intended to invest up to $100 billion in OpenAI, with the startup committed to deploying at least 10 gigawatts of Nvidia products. The companies have yet to announce a formal deal. That same month, Nvidia said it would invest $5 billion in Intel as part of a partnership.

Groq has been targeting revenue of $500 million this year amid booming demand for AI accelerator chips used in speeding up the process for large language models to complete inference-related tasks. The company was not pursuing a sale when it was approached by Nvidia, Davis said.

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

In its initial filing with the SEC, announcing a $10.3 million fundraising in late 2016, Groq listed as principals Ross and Douglas Wightman, an entrepreneur and former engineer at the Google X “moonshot factory.” Wightman left Groq in 2019, according to his LinkedIn profile.

Groq isn’t the only chip startup that’s gained traction during the AI boom.

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

In a filing with the SEC, Cerebras said it does not intend to conduct a proposed offering “at this time,” but didn’t provide a reason. A spokesperson told CNBC at the time that the company still hopes to go public as soon as possible.

Cerebras filed for an IPO in late 2024, as it was ramping up to take on Nvidia in an effort to create processors for running generative AI models.

— CNBC’s Jordan Novet contributed to this report.

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