Nvidia to Acquire AI Chip Startup Groq for $20 Billion in Record Deal

• Groq was valued at $6.9 billion just three months ago in September, meaning the deal represents a nearly 3x return for recent investors including BlackRock and Samsung
• Nvidia is positioning the transaction as a 'non-exclusive licensing agreement' and will integrate Groq's low-latency processors into its AI factory architecture
• Groq will remain as an independent company under new CEO Simon Edwards, with its GroqCloud business continuing to operate separately

Nvidia Acquires AI Chip Startup Groq for $20 Billion

Nvidia has agreed to purchase assets from AI accelerator chip designer Groq for $20 billion in cash, marking the chipmaker's largest acquisition ever. The deal, framed as a "non-exclusive licensing agreement," surpasses Nvidia's previous record purchase of Mellanox for $7 billion in 2019.

Key Transaction Details:

• Groq was valued at $6.9 billion in September 2024 after raising $750 million
• Investors included BlackRock, Neuberger Berman, Samsung, Cisco, Altimeter, and 1789 Capital
• Groq's cloud business is not included in the transaction
• Nvidia held $60.6 billion in cash and short-term investments as of October 2024

Leadership Changes:

• Groq founder/CEO Jonathan Ross and President Sunny Madra will join Nvidia
• Finance chief Simon Edwards will become CEO of the remaining independent Groq entity
• Ross was a co-creator of Google's tensor processing unit (TPU), competing with Nvidia's GPUs

Strategic Context:

Nvidia CEO Jensen Huang stated the company plans to integrate Groq's low-latency processors into its AI factory architecture to serve broader AI inference and real-time workloads. This follows Nvidia's September acquisition of Enfabrica's team and technology for over $900 million.

Market Implications:

The deal reflects intensifying competition in the AI chip sector, with tech giants aggressively acquiring talent and technology through licensing arrangements. Groq was targeting $500 million in revenue for 2024 amid booming demand for AI accelerator chips. The acquisition strengthens Nvidia's position against competitors like Google's TPUs and other emerging AI chipmakers such as Cerebras Systems, which recently postponed its IPO after raising over $1 billion.