Nvidia acquires AI chip startup Groq for nearly $20 billion in largest deal yet

Nvidia Disruptive CEO Alex Davis, who led the company's latest funding round in September, said the company has agreed to buy assets from Groq, a designer of high-performance artificial intelligence accelerator chips, for $20 billion in cash.

Davis, whose company has invested more than $500 million in Groq since its founding in 2016, said the deal came together quickly. Groq raised $750 million three months ago at a valuation of about $6.9 billion. In addition to Samsung, investors in the round included BlackRock and Neuberger Berman. Cisco1789 Capital, where Altimeter and Donald Trump Jr. are partners.

“We have entered into a non-exclusive license agreement with Nvidia for Groq's inference technology,” Groq said in a blog post Wednesday. Under the deal, Groq founder and CEO Jonathan Ross, along with Sunny Mudra, the company's president and other senior executives, will “join NVIDIA to support the advancement and expansion of the licensed technology,” the post said.

Groq will continue as an “independent company” led by finance director Simon Edwards as CEO, it added.

Nvidia CFO Colette Kress declined to comment on the deal.

Davis told CNBC that while NVIDIA is acquiring all of Groq's assets, its nascent Groq cloud business is not part of the deal. “GroqCloud will continue to operate without interruption,” Groq said.

The deal marks NVIDIA's largest acquisition to date. The company's biggest acquisition to date came in 2019, when it acquired Israeli chip designer Mellanox for nearly $7 billion. As of the end of October, Nvidia had $60.6 billion in cash and short-term investments, up from $13.3 billion at the beginning of 2023.

Groq is targeting $500 million in revenue this year as demand for its AI accelerator chips, used to speed up the process by which large language models complete inference-related tasks, soars. The company was not pursuing a sale when approached by Nvidia.

Groq was founded in 2016 by a group of former engineers, including Ross. he was one of the creators of Google Tensor Processing Units (TPUs) are the company's custom chips used by some companies as a replacement for Nvidia's graphics processing units.

In its first filing with the SEC announcing the $10.3 million funding in late 2016, Groq named Ross and Douglas Wightman, an entrepreneur and former Google X “moonshot factory” engineer, as principals.

Groq is not the only chip startup to gain attention during the AI ​​boom.

AI chipmaker Cerebras Systems had planned to go public this year, but withdrew its IPO application in October after announcing it had raised more than $1 billion in a funding round.

In an SEC filing, Cerebras said it does not intend to pursue the proposed offering “at this time,” but did not say why. At the time, a spokesperson told CNBC that the company wanted to go public as soon as possible.

Cerebras has filed for an IPO in late 2024 as it ramps up efforts to take on Nvidia by developing processors to run generative AI models. The filing revealed that it relies heavily on a single customer in the United Arab Emirates, G42, which is backed by Microsoft, which is also an investor in Cerebras.

—CNBC's Jordan Novet contributed to this report.

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