Nvidia shopping for AI chip startup Groq for about $20 billion, greatest deal

Nvidia has agreed to purchase belongings from Groq, a designer of high-performance synthetic intelligence accelerator chips, for $20 billion in money, based on Alex Davis, CEO of Disruptive, which led the startup’s newest financing spherical in September.

Davis, whose agency has invested greater than half a billion {dollars} in Groq because the firm was based in 2016, mentioned the deal got here collectively rapidly. Groq raised $750 million at a valuation of about $6.9 billion three months in the past. Buyers within the spherical included Blackrock and Neuberger Berman, in addition to Samsung, Cisco, Altimeter and 1789 Capital, the place Donald Trump Jr. is a accomplice.

Groq mentioned in a weblog publish on Wednesday that it is “entered right into a non-exclusive licensing settlement with Nvidia for Groq’s inference know-how,” with out disclosing a worth. With the deal, Groq founder and CEO Jonathan Ross together with Sunny Madra, the corporate’s president, and different senior leaders “will be a part of Nvidia to assist advance and scale the licensed know-how,” the publish mentioned.

Groq added that it’ll proceed as an “impartial firm,” led by finance chief Simon Edwards as CEO.

Colette Kress, Nvidia’s CFO, declined touch upon the transaction.

Davis instructed CNBC that Nvidia is getting all of Groq’s belongings, although its nascent Groq cloud enterprise is just not a part of the transaction. Groq mentioned “GroqCloud will proceed to function with out interruption.”

The deal represents by far Nvidia’s largest buy ever. The chipmaker’s greatest acquisition so far got here in 2019, when it purchased Israeli chip designer Mellanox for near $7 billion. On the finish of October, Nvidia had $60.6 billion in money and short-term investments, up from $13.3 billion in early 2023.

In an e mail to staff that was obtained by CNBC, Nvidia CEO Jensen Huang mentioned the settlement will increase Nvidia’s capabilities.

“We plan to combine Groq’s low-latency processors into the NVIDIA AI manufacturing facility structure, extending the platform to serve an excellent broader vary of AI inference and real-time workloads,” Huang wrote.

Huang added that, “Whereas we’re including proficient staff to our ranks and licensing Groq’s IP, we aren’t buying Groq as an organization.”

Nvidia orchestrated an identical however smaller deal in September, when it shelled out over $900 million to rent Enfabrica CEO Rochan Sankar and different staff on the AI {hardware} startup, and to license the corporate’s know-how, CNBC reported on the time.

Different tech giants, together with Meta, Google and Microsoft, have spent closely during the last couple years to rent prime AI expertise by way of varied kinds of licensing offers.

Nvidia has ramped up its investments in chip startups and the broader ecosystem as its money pile has mounted. The corporate has backed AI and vitality infrastructure firm Crusoe, AI mannequin developer Cohere, and boosted its funding in CoreWeave because the AI-centric cloud supplier was on the point of go public this 12 months.

In September, Nvidia mentioned it supposed to take a position as much as $100 billion in OpenAI, with the startup dedicated to deploying at the very least 10 gigawatts of Nvidia merchandise. The businesses have but to announce a proper deal. That very same month, Nvidia mentioned it will make investments $5 billion in Intel as a part of a partnership.

Groq has been focusing on income of $500 million this 12 months amid booming demand for AI accelerator chips utilized in dashing up the method for big language fashions to finish inference-related duties. The corporate was not pursuing a sale when it was approached by Nvidia, Davis mentioned.

Groq was based in 2016 by a bunch of former engineers, together with Ross. He was one of many creators of Google’s tensor processing unit, or TPU, the search large’s customized chip that is being utilized by some firms as an alternative choice to Nvidia’s graphics processing models. 

In its preliminary submitting with the SEC, saying a $10.3 million fundraising in late 2016, Groq listed as principals Ross and Douglas Wightman, an entrepreneur and former engineer on the Google X “moonshot manufacturing facility.” Wightman left Groq in 2019, based on his LinkedIn profile.

Groq is not the one chip startup that is gained traction throughout the AI increase.

AI chipmaker Cerebras Programs had deliberate to go public this 12 months however withdrew its IPO submitting in October after saying that it raised over $1 billion in a fundraising spherical.

In a submitting with the SEC, Cerebras mentioned it doesn’t intend to conduct a proposed providing “presently,” however did not present a purpose. A spokesperson instructed CNBC on the time that the corporate nonetheless hopes to go public as quickly as doable.

Cerebras filed for an IPO in late 2024, because it was ramping as much as tackle Nvidia in an effort to create processors for working generative AI fashions.

— CNBC’s Jordan Novet contributed to this report.

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