NVIDIA Corporation (NVDA.US) makes a bold move by acquiring the core assets of AI chip startup Groq for $2 billion, making it the largest deal in the company's history.

Chip giant NVIDIA Corporation (NVDA.US) has agreed to acquire the related assets of high-performance artificial intelligence accelerator chip startup Groq for $20 billion in cash, making it the largest deal in NVIDIA Corporation's history. According to Alex Davis, CEO of Disruptive, who disclosed the information (Disruptive led Groq's latest round of financing in September), Groq has raised over $500 million since its founding in 2016. Davis stated that the deal progressed very quickly. Just three months ago, Groq completed a $750 million financing round, with a valuation of approximately $6.9 billion, with investors including BlackRock, Inc., Newberger Berman, and Samsung, Cisco Systems, Inc. (CSCO.US), Altimeter, and 1789 Capital. Groq confirmed on Wednesday in a blog post that the company has reached a non-exclusive licensing agreement with NVIDIA Corporation to license its AI inference technology to NVIDIA Corporation. Groq's founder and CEO Jonathan Ross, President Sunny Madra, and several core executives will join NVIDIA Corporation to assist in advancing and scaling the related technology. At the same time, Groq emphasized that the company will continue to operate as an "independent entity," with former CFO Simon Edwards as the CEO. NVIDIA Corporation has kept details of the deal quiet. The company's CFO, Colette Kress, declined to comment. Davis stated that NVIDIA Corporation will acquire almost all of Groq's assets, but Groq's cloud computing business GroqCloud is not included in the transaction and will continue to operate uninterrupted. This deal far exceeds NVIDIA Corporation's previous acquisition records. Their largest acquisition prior to this was in 2019, when they acquired Israeli chip design company Mellanox for approximately $7 billion. As of the end of October this year, NVIDIA Corporation had a cash and short-term investments balance of $60.6 billion, a significant increase from $13.3 billion at the beginning of 2023, providing ample "ammunition" for their substantial investments. In an internal email, NVIDIA Corporation CEO Jensen Huang stated that this agreement will significantly expand the company's technological capabilities. "We plan to integrate Groq's low-latency processors into the NVIDIA Corporation AI factory architecture, enabling the platform to cover a wider range of AI inference and real-time workloads." He also emphasized that NVIDIA Corporation is not acquiring Groq as a whole, but rather bringing in talent and licensing its core intellectual property. Similar talent and technology licensing deals are not new. In September of this year, NVIDIA Corporation spent over $900 million to bring in AI hardware startup Enfabrica's CEO Rochan Sankar and his team through licensing and recruitment. In recent years, tech giants like Meta (META.US), Alphabet Inc. Class C (GOOGL.US, GOOG.US), and Microsoft Corporation (MSFT.US) have also frequently competed for top AI talent through similar structured transactions. With a significant increase in cash reserves, NVIDIA Corporation continues to ramp up its investment layout in the entire AI ecosystem. The company has invested in AI and energy infrastructure company Crusoe, model developer Cohere, and further increased its stake after the listing of cloud service provider CoreWeave (CRWV.US). In September of this year, NVIDIA Corporation also announced plans to invest up to $1 billion in OpenAI and have OpenAI commit to deploying at least 10 gigawatts of NVIDIA Corporation products, although the agreement has not been officially announced; in the same month, NVIDIA Corporation also announced a $5 billion investment in Intel Corporation to deepen their cooperation. For Groq, amidst the surge in demand for AI inference acceleration chips this year, the company aims to achieve $500 million in revenue. Davis stressed that Groq did not seek to sell its assets before NVIDIA Corporation approached them. The company was founded by a group of former engineers in 2016, with founder Ross having helped design Alphabet Inc. Class C's TPU (Tensor Processing Unit), which is currently viewed by some companies as a custom chip alternative to NVIDIA Corporation's GPUs. In the AI craze, Groq is not the only chip startup attracting attention. Another AI chip company, Cerebras Systems, had planned to go public this year but withdrew its IPO application in October and instead completed a financing round of over $1 billion. Their IPO filing indicated that the company is attempting to challenge NVIDIA Corporation in the generative AI processor field, but their business heavily relies on a single customer.