Nvidia buys AI chip startup Groq for around $20 billion, largest deal

Nvidia has agreed to buy Groq, a designer of high-performance artificial intelligence accelerator chips, for $20 billion in cash, according to Disruptive CEO Alex Davis, who led the startup’s latest project. financing cycle in September.

Davis, whose company has invested more than half a billion dollars in Groq since the company’s founding in 2016, said the deal came together quickly. Groq raised $750 million at a valuation of around $6.9 billion three months ago. Investors participating in the round included Blackrock and Neuberger Berman, as well as Samsung, Cisco, Altimeter and 1789 Capital, where Donald Trump Jr. is a partner.

Groq is expected to alert its investors of the deal later on Wednesday. Although the acquisition includes all of Groq’s assets, its nascent Groq cloud business is not part of the deal, Davis said.

This would be by far the largest contract ever made by Nvidia. The chipmaker’s biggest acquisition to date came in 2019 with the purchase of the Israeli chip designer. Mellanox for almost 7 billion dollars. At the end of October, Nvidia had $60.6 billion in species and short-term investments, compared to $13.3 billion at the start of 2023.

Groq is targeting $500 million in revenue this year amid growing demand for AI accelerator chips used to speed up the process of enabling large language models to perform inference-related tasks. The company wasn’t looking to sell when approached by Nvidia.

Colette Kress, Nvidia’s chief financial officer, declined to comment on the transaction.

Groq was based in 2016 by a group of former engineers, including Jonathan Ross, the company’s CEO. Ross was one of the creators of Google tensor processing unit, or TPU, the company’s custom chip that is used by some companies as an alternative to Nvidia’s graphics processing units.

In its initial version deposit With the SEC announcing a $10.3 million fundraising round in late 2016, the company named Ross and Douglas Wightman, an entrepreneur and former engineer at Google X’s “Moonshot Factory” as directors.

Nvidia has ramped up its investments in chip startups and the broader ecosystem as its cash flow has grown. The company backed AI and energy infrastructure company Crusoe, AI model developer Cohere, and increased investments in CoreWeave as the AI-centric cloud provider prepared to go public this year.

In September, Nvidia said so destined investing up to $100 billion in OpenAI, with the startup pledging to deploy at least 10 gigawatts of Nvidia products. The companies have not yet announced a formal agreement. The same month, Nvidia announced that it would invest $5 billion in Intel within the framework of a partnership.

Cerebras Systems is another chip startup that gained traction during the AI ​​boom. The company had planned to go public this year, but withdrew its IPO in October after announcing it had raised more than $1 billion in a fundraising round.

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

—Jordan Novet of CNBC contributed to this report.

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