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

Nvidia Disruptive has agreed to buy assets from Groq, a designer of high-performance AI accelerator chips, for $20 billion in cash, according to Disruptive CEO Alex Davis, who is leading the startup’s latest move. funding round In September.

Davis, whose firm has invested more than half a billion dollars in Groq since its founding in 2016, said the deal happened quickly. Groq raised $750 million three months ago at a valuation of about $6.9 billion. In addition to Samsung, investors in the round included Blackrock and Neuberger Berman. Cisco1789 Capital, a partnership between Altimeter and Donald Trump Jr.

Groq said: blog post On Wednesday, it was stated that “a non-exclusive licensing agreement has been signed with Nvidia for Groq’s inference technology,” without disclosing a price. With the deal, Groq founder and CEO Jonathan Ross, the company’s president Sunny Madra, and other senior leaders “will join Nvidia to help advance and scale the licensed technology,” the post said.

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

Nvidia CFO Colette Kress declined to comment on the transaction.

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

The deal represents Nvidia’s largest acquisition ever. The chipmaker’s largest acquisition to date came in 2019, when it acquired Israeli chip designer Mellanox for close to $7 billion. At the end of October, Nvidia’s cash and short-term investments increased from $13.3 billion to $60.6 billion at the beginning of 2023.

In an email to employees obtained by CNBC, Nvidia CEO Jensen Huang said the deal will expand Nvidia’s capabilities.

“We plan to integrate Groq’s low-latency processors into the NVIDIA AI factory architecture and expand the platform to serve a broader range of AI inference and real-time workloads,” Huang wrote.

Huang added: “While we are adding talented employees to our pipeline and licensing Groq’s intellectual property, we are not acquiring Groq as a company.”

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

Including other tech giants MetaGoogle and Microsofthas spent heavily over the past few years recruiting top AI talent through various licensing deals.

Nvidia has increased its investments in chip startups and the broader ecosystem as its cash pile grows. The company has backed and increased investments in AI and energy infrastructure company Crusoe and AI model developer Cohere. CoreWeave The AI-centric cloud provider was preparing to go public this year.

In September, Nvidia said it planned to invest up to $100 billion in OpenAI and that the startup had committed to deploying at least 10 gigawatts of Nvidia products. The companies have not yet announced a formal agreement. That same month, Nvidia said it would invest $5 billion. Intel as part of a partnership.

Groq is targeting $500 million in revenue this year amid growing demand for AI accelerator chips used to speed up the process of large language models completing inference-related tasks. Davis said the company was not pursuing a sale when approached by Nvidia.

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

Initially filing With the SEC announcing a $10.3 million fundraising in late 2016, Groq listed Ross and Douglas Wightman, an entrepreneur and former engineer at the Google X “moonshot factory,” as directors. Wightman left Groq in 2019. LinkedIn profile.

Groq isn’t the only chip startup gaining traction during the AI ​​boom.

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

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

Cerebras has filed for an IPO in late 2024 as it prepares to rival Nvidia in its effort to create processors to run generative AI models. The filing revealed heavy reliance on a single customer in the United Arab Emirates, Microsoft-backed G42, which is also a Cerebras investor.

— CNBC’s Jordan Novet contributed to this report.

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