Nvidia to Acquire AI Chip Startup Groq’s Assets in Record $20 Billion Deal

Nvidia has reached an agreement to acquire key assets from Groq, a developer of high-performance artificial intelligence accelerator chips, in a cash deal valued at approximately $20 billion. The transaction would mark Nvidia’s largest acquisition to date, according to Alex Davis, CEO of Disruptive, the firm that led Groq’s most recent funding round.

Davis, whose firm has invested more than $500 million in Grok since its founding in 2016, said the deal came together rapidly. Just three months ago, Grok raised $750 million at a valuation of roughly $6.9 billion, with investors including BlackRock, Neuberger Berman, Samsung, Cisco, Altimeter, and 1789 Capital, where Donald Trump Jr. is a partner.

In a blog post published Wednesday, Groq confirmed it had entered into a non-exclusive licensing agreement with Nvidia for its inference technology, though it did not disclose financial terms. As part of the arrangement, Grok founder and CEO Jonathan Ross, company president Sunny Madra, and several senior executives will join Nvidia to help advance and scale the licensed technology. Grok added that it will continue operating as an independent company, now led by finance chief Simon Edwards as CEO.

Nvidia CFO Colette Kress declined to comment on the deal. Davis told CNBC that Nvidia is acquiring all of Groq’s assets, with the exception of its early-stage cloud business. Grok confirmed that GroqCloud will continue operating without disruption.

This acquisition goes beyond Nvidia’s previous biggest acquisition, which was its nearly $7 billion acquisition of Mellanox in 2019. In late October, it was reported that Nvidia had a cash and short-term investment balance of $60.6 billion, which rose greatly from $13.3 billion in early 2023.

In an internal company email accessed by CNBC, Nvidia CEO Jensen Huang said that this acquisition is going to significantly enhance their capabilities. He further stated that with Nvidia’s AI factory architecture, low-latency processors from Groq will now enable accomplishments of a wider range of inference and real-time workloads. Huang also stated that Nvidia is not acquiring Groq but is instead licensing its intellectual property and talent.

This acquisition comes in the wake of another minor acquisition that happened in September, where Nvidia acquired key executives from an AI hardware startup called Enfabrica. In that acquisition, Nvidia's expenditure exceeded $900 million. Similarly, other technology firms such as Meta, Google, and Microsoft are also increasingly engaging in acquisition of key personnel through technology licensing.

Groq, which did not have a buyer lined up, has been aiming for revenue of $500 million for this year amidst the high demand for AI acceleration chips. Established by a host of ex-Google engineers, including Ross, one of the minds behind Google’s TPU, Groq has joined a host of new players within the industry of microchips, including Cerebras Systems, aiming to take on Nvidia’s leadership.