Exclusive: Nvidia buying AI chip startup Groq for about $20 billion in its largest acquisition

Nvidia has reached an agreement to acquire Groq, a company specializing in the design of high-performance artificial intelligence accelerator chips, for a staggering $20 billion in cash. This significant move was confirmed by Alex Davis, CEO of Disruptive, which played a pivotal role in Groq’s latest financing round earlier this September. Davis, whose firm has invested over $500 million into Groq since its inception in 2016, noted that the acquisition deal was finalized swiftly. Just three months ago, Groq successfully raised $750 million, achieving a valuation of approximately $6.9 billion. This funding round attracted notable investors such as Blackrock, Neuberger Berman, Samsung, Cisco, Altimeter, and 1789 Capital, the latter of which includes Donald Trump Jr. as a partner. Groq is expected to notify its investors regarding the acquisition soon. Importantly, while Nvidia will be acquiring all of Groq's assets, the company's emerging Groq cloud business will not be part of this transaction, according to Davis. This acquisition marks Nvidia’s largest transaction to date, significantly surpassing its previous record set in 2019 when it purchased Israeli chipmaker Mellanox for nearly $7 billion. As of late October, Nvidia's cash and short-term investments had soared to $60.6 billion, a dramatic increase from $13.3 billion at the beginning of 2023. Groq has set an ambitious revenue target of $500 million for the year, fueled by the surging demand for AI accelerator chips that enhance the processing capabilities of large language models during inference tasks. Notably, Groq was not actively seeking a sale when Nvidia approached them. Nvidia's CFO, Colette Kress, has refrained from commenting on this transaction. Founded in 2016 by former engineers including CEO Jonathan Ross, Groq stems from a team that developed Google's tensor processing unit (TPU), a custom chip utilized by several companies as an alternative to Nvidia’s graphics processing units. In its initial SEC filing, which announced a $10.3 million fundraising in late 2016, Groq identified Ross and Douglas Wightman, a former Google X engineer, as key players in the company. Nvidia has been intensifying its investments in chip startups and the broader tech ecosystem as its financial resources have increased. Recent investments include backing AI and energy infrastructure firm Crusoe and AI model developer Cohere, as well as bolstering its stake in CoreWeave, an AI-centric cloud provider preparing for a public offering this year. In September, Nvidia also revealed plans to invest up to $100 billion in OpenAI, with the latter committing to deploying a minimum of 10 gigawatts of Nvidia products, though no formal agreement has been announced yet. Additionally, Nvidia disclosed a $5 billion investment in Intel as part of a strategic partnership. Cerebras Systems, another chip startup gaining momentum during the AI surge, had intended to go public this year but retracted its IPO filing in October, despite raising over $1 billion in a recent funding round. A representative stated that while the company does not plan to conduct the proposed offering at this time, it remains optimistic about going public in the near future. This acquisition and ongoing investments illustrate Nvidia's commitment to bolstering its leadership in the AI chip market amid growing demand for advanced technology solutions.