Nvidia has announced its largest-ever acquisition, purchasing artificial intelligence chip startup Groq for $20 billion in an all-cash transaction. The deal, which triples the size of Nvidia's previous record $7 billion purchase of Mellanox in 2019, was funded directly from the company's substantial cash reserves, which have grown from $13.3 billion in early 2023 to $60.6 billion.
The acquisition represents a strategic consolidation in the competitive AI hardware market. While Nvidia dominates the market for training AI models, Groq has carved out a significant niche in inference—the process of running trained AI models in real-time. Groq's hardware is reported to run AI workloads about four times faster than Nvidia's GPUs while using significantly less power and cost, making it attractive for large-scale deployments.
Groq was not officially for sale when Nvidia initiated the deal, which came together rapidly. The startup had recently raised $750 million in a funding round just three months prior, valuing the company at $6.9 billion. Notable investors in that round included BlackRock, Neuberger Berman, Samsung, Cisco, and 1789 Capital, where Donald Trump Jr. is a partner. Nvidia's purchase price values Groq at nearly three times its recent private valuation.
However, the transaction does not include Groq's cloud division, GroqCloud, which will remain a separate entity. The cloud platform reportedly has over a million developers and major customers like Meta using it for inference workloads. Groq, founded in 2016 by ex-Google engineers including CEO Jonathan Ross, aims to reach $500 million in revenue this year, fueled by global AI chip demand.
The move is seen as Nvidia's effort to control the entire AI stack, from training to inference, potentially strengthening its near-monopoly in AI chips where it already holds about 90% of the training market. This consolidation is likely to draw scrutiny from regulators like the Federal Trade Commission (FTC) over antitrust concerns, especially as other tech giants like Amazon, Google, and Microsoft seek to reduce their dependence on Nvidia.
This acquisition follows a pattern of aggressive investment by Nvidia in the AI ecosystem, including investments in AI model builder Cohere, energy-infrastructure firm Crusoe, and cloud platform CoreWeave. The company has also discussed a potential $100 billion investment in OpenAI and a separate $5 billion investment in Intel.
The deal sends a strong signal to other AI chip startups like Cerebras Systems, SambaNova, and Graphcore, indicating Nvidia's willingness to acquire competitive threats. In a related development, Elon Musk of xAI posted that his company aims to have "more AI compute than everyone else combined in <5 years," signaling growing competition in the sector Nvidia seeks to dominate.
