Key takeaways Nvidia has agreed to a non-exclusive licensing deal with AI chip startup Groq, valued at approximately $20 billion, marking the largest transaction in Nvidia’s history. Groq founder Jona...
The transaction represents Nvidia's largest deal to date, far surpassing its previous record of $7 billion for Israeli chip designer Mellanox in 2019.
The arrangement, announced Wednesday, allows Nvidia to license Groq's inference technology while bringing key executives, including founder and CEO Jonathan Ross and president Sunny Madra, onto its team.
However, the deal is structured as a non-exclusive licensing agreement rather than a traditional acquisition, with Groq continuing to operate as an independent company under new CEO Simon Edwards.
"Today Groq entered into a non-exclusive licensing agreement with Nvidia for Groq's inference technology.
Along with other members of the Groq team, I'll be joining Nvidia to help integrate the licensed technology. GroqCloud will continue to operate without interruption," Ross said in a LinkedIn post.
In an internal email obtained by CNBC, Nvidia CEO Jensen Huang explained the strategic rationale behind the agreement.
"We plan to integrate Groq's low-latency processors into the NVIDIA AI factory architecture, extending the platform to serve an even broader range of AI inference and real-time workloads," Huang wrote.
Huang clarified the nature of the transaction, adding, "While we are adding talented employees to our ranks and licensing Groq's IP, we are not acquiring Groq as a company."
The deal positions Nvidia to strengthen its presence in the AI inference market, where trained models respond to user requests in real time.
While Nvidia dominates the market for training AI models, it faces increased competition in inference from traditional rivals like Advanced Micro Devices and startups including Groq and Cerebras Systems.
Groq specializes in language processing units (LPUs) that use on-chip SRAM memory rather than external high-bandwidth memory chips.
This approach enables faster processing speeds and lower energy consumption, though it limits the size of models that can be served.
The company has claimed its chips can run large language models at 10 times the speed while using one-tenth the energy of conventional GPUs.
The deal follows a pattern increasingly common among technology giants seeking AI capabilities without triggering lengthy antitrust reviews.
Similar arrangements have been structured by Microsoft, Meta, Google, and Amazon in recent months to secure technology and talent from AI startups.
"Antitrust would seem to be the primary risk here, though structuring the deal as a non-exclusive license may keep the fiction of competition alive (even as Groq's leadership and, we would presume, technical talent move over to Nvidia)," Bernstein analyst Stacy Rasgon wrote in a note to clients following the announcement.
Rasgon also noted that Nvidia CEO Jensen Huang's "relationship with the Trump administration appears among the strongest of the key US tech companies."
Founded in 2016 by former Google engineers, Groq has experienced rapid growth during the AI boom. Ross previously helped create Google's Tensor Processing Unit (TPU), the search giant's custom chip that competes with Nvidia for AI workloads.
The startup raised $750 million in September 2024 at a $6.9 billion valuation, more than doubling from $2.8 billion in August of the previous year.
Investors in that round included BlackRock, Neuberger Berman, Samsung, Cisco, and 1789 Capital. Davis told CNBC the company was targeting $500 million in revenue this year and was not actively pursuing a sale when Nvidia approached.
"The deal came together quickly," Davis said, noting that his firm has invested more than half a billion dollars in Groq since its founding.
Nvidia ended October with $60.6 billion in cash and short-term investments, up from $13.3 billion in early 2023, providing substantial resources for strategic deals as it expands its AI ecosystem.
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