Nvidia to Acquire AI Chip Innovator Groq in Landmark $20 Billion Deal

Nvidia Reportedly Nears $20 Billion Acquisition of AI Chip Designer Groq

In a move that would significantly bolster its artificial intelligence hardware capabilities, Nvidia is reportedly in advanced talks to acquire Groq, a company specializing in high-performance AI accelerator chips, for an estimated $20 billion in cash. The acquisition, if finalized, would represent Nvidia’s largest deal to date, dwarfing its 2019 acquisition of Mellanox for nearly $7 billion.

The news comes from Alex Davis, CEO of Disruptive, the firm that spearheaded Groq’s most recent financing round in September. Disruptive has been a significant early investor in Groq, injecting over half a billion dollars since the startup’s inception in 2016. Davis indicated that the deal progressed rapidly, a testament to the burgeoning demand for specialized AI silicon. Just three months prior to these acquisition talks, Groq secured $750 million in funding at a valuation of approximately $6.9 billion, with notable investors including Blackrock, Neuberger Berman, Samsung, Cisco, Altimeter, and 1789 Capital.

Groq is expected to formally notify its investors of the impending transaction imminently. While the acquisition encompasses Groq’s core assets, its emerging cloud business is reportedly excluded from the deal. This strategic move underscores Nvidia’s aggressive expansion in the AI ecosystem, fueled by its substantial cash reserves. As of the end of October, Nvidia held approximately $60.6 billion in cash and short-term investments, a significant increase from $13.3 billion at the beginning of 2023, providing ample financial flexibility for strategic acquisitions.

Groq has been experiencing a surge in demand, driven by the critical need for chips that accelerate inference tasks for large language models. The company had projected revenues of $500 million for the current year, reflecting the red-hot market for AI infrastructure. Notably, Groq was not actively seeking a sale when approached by Nvidia, suggesting the acquisition was a proactive strategic move by the chip giant.

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

Founded in 2016 by a team of former engineers, including CEO Jonathan Ross, Groq’s origins are deeply rooted in cutting-edge AI development. Ross was a key figure in the creation of Google’s Tensor Processing Unit (TPU), a custom-designed chip that has offered an alternative to Nvidia’s dominant Graphics Processing Units (GPUs) for certain AI workloads. Groq’s initial SEC filing in late 2016, announcing a $10.3 million fundraising, listed Ross and entrepreneur Douglas Wightman, a former engineer at Google’s “moonshot factory,” as principals.

This potential acquisition of Groq aligns with Nvidia’s broader strategy of investing heavily in AI startups and the surrounding technological ecosystem. The company has already backed notable players such as AI and energy infrastructure firm Crusoe, AI model developer Cohere, and significantly increased its investment in CoreWeave, an AI-centric cloud provider. These investments highlight Nvidia’s commitment to securing its position across the entire AI value chain, from foundational hardware to specialized software and cloud services.

Furthermore, Nvidia has been forging strategic alliances and making substantial commitments within the AI landscape. In September, the company announced its intention to invest up to $100 billion in OpenAI, with the AI research lab committing to deploying at least 10 gigawatts of Nvidia products. While a formal deal has yet to be announced, this signals a deep-seated partnership. In the same month, Nvidia also committed $5 billion to Intel as part of a collaborative effort.

The broader AI chip market continues to see innovation and significant funding rounds. Cerebras Systems, another prominent chip startup focused on AI, had also planned to go public this year. However, the company withdrew its IPO filing in October after raising over $1 billion in a new funding round. While Cerebras cited current market conditions, it expressed continued optimism about a future public offering. The rapid evolution and intense competition within the AI hardware sector underscore the strategic importance of acquisitions like the potential Nvidia-Groq deal, as companies race to secure the technological advancements needed to power the next wave of artificial intelligence.