Nvidia is preparing for its largest deal to date, agreeing to pay about $20 billion in cash for chipmaker Groq’s assets, including its AI inference technology.
On December 24, Groq said it has entered a non-exclusive licensing agreement that gives Nvidia rights to use Groq inference technology. The company said founder and chief executive Jonathan Ross, President Sunny Madra, and other senior leaders will move to Nvidia to help develop and scale the licensed technology. However, Groq will continue to operate as an independent company, led by finance chief Simon Edwards, who will become chief executive.
Alex Davis, chief executive of investment firm Disruptive, which led Groq’s latest funding round, told CNBC that Nvidia is acquiring all of Groq’s assets apart from its GroqCloud business and said the deal is valued at about $20 billion.
Furthermore, Jensen Huang, the chief executive of Nvidia, revealed that the company intends to incorporate Groq’s low-latency processors into its artificial intelligence factory architecture. He said the addition will allow the platform to serve a broader range of inference and real-time workloads, and noted that Nvidia is adding Groq staff and intellectual property rather than acquiring Groq as a corporate entity.
The deal surpasses Nvidia’s 2019 purchase of chip company Mellanox, which cost close to $7 billion, and marks the largest acquisition in the chipmaker’s history.
Why Groq Matters In The Artificial Intelligence Supply Chain
Groq is a U.S. artificial intelligence chip company based in Mountain View, California. It designs application-specific accelerator chips aimed at speeding up inference, the stage when trained models generate answers. The company was founded in 2016 by Jonathan Ross, who previously helped create the Tensor Processing Unit at Google.
Its main product is the Language Processing Unit, a processor architecture built to deliver low latency and high throughput on large language models and other AI workloads, offered to customers through its GroqCloud service.
Groq has several big-name investors among its backers, including BlackRock, Neuberger Berman, Samsung, Cisco, Altimeter, and 1789 Capital, where Donald Trump Jr. is a partner. Three months ago, these names and other investors put $750 million into the company, lifting its valuation to about $6.9 billion.
Nvidia Stock Nears $190 After Groq Announcement
Nvidia shares have been going higher into the Groq announcement, with the one-hour chart showing the price climbing from about $170 on December 8 to roughly $188 on December 24, a gain of about 10%. However, in the latest session, the stock opened near $183, touched an intraday high around $185, and closed at $188, while pre-market indications point close to $190.
Momentum indicators show the rally is getting stretched, with the 14-period relative strength index sitting just above 70, a level many traders see as overbought but also as confirmation of strong upward momentum.
Taken together, the recent price gains and firm momentum readings suggest the Groq deal announcement gave investors the push needed to return to Nvidia as it moves to strengthen its lead in the artificial intelligence sector.
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