By Stephen Nellis
Dec 24 (Reuters) – Nvidia agreed to license startup Groq’s chip technology and hire its CEO, a veteran of Alphabet’s Google, Groq said in a blog post on Wednesday.
The deal follows a familiar pattern in recent years in which the world’s largest technology companies pay large sums in deals with promising startups to acquire their technology and talent, but stop short of formally acquiring the target.
Groq specializes in what is known as inference, where already trained artificial intelligence models respond “to user requests.” While Nvidia dominates the AI model training market, it faces much more competition in inference, where traditional rivals such as Advanced Micro Devices have attempted to challenge it, as well as startups such as Groq and Cerebras Systems.
Nvidia agreed to a “non-exclusive” license for Groq’s technology, Groq said. It said its founder Jonathan Ross, who helped Google launch its AI chip program, as well as Groq president Sunny Madra and other members of its engineering team, will join Nvidia.
A person close to Nvidia confirmed the licensing agreement.
Groq did not disclose financial details of the deal. CNBC reported that Nvidia had agreed to acquire Groq for $20 billion in cash, but neither Nvidia nor Groq commented on the report. Groq said on its blog that it will continue to operate as an independent company with Simon Edwards as CEO and that its cloud business will continue to operate.
In similar recent deals, Microsoft’s top AI executive struck a $650 million deal with a startup that was billed as a licensing fee, and Meta spent $15 billion to hire Scale AI’s CEO without acquiring the entire company. Amazon hired the founders of Adept AI and Nvidia made a similar deal this year. The deals have come under scrutiny by regulators, although none have been canceled yet.
“Antitrust laws appear to be the main risk here, although structuring the deal as a non-exclusive license may keep the competition fiction alive (even as Groq’s leadership and, we assume, technical talent move to Nvidia),” Bernstein analyst Stacy Rasgon wrote in a note to clients Wednesday after Groq’s announcement. And Nvidia CEO Jensen Huang’s “relationship with the Trump administration appears among the strongest of major U.S. tech companies.”
Groq more than doubled its valuation to $6.9 billion from $2.8 billion in August last year, following a $750 million funding round in September.
Groq is one of several upstarts that do not use high-bandwidth external memory chips, freeing them from the memory shortage plaguing the global chip industry. The approach, which uses a form of on-chip memory called SRAM, helps speed up interactions with chatbots and other AI models, but also limits the size of the model that can be served.