Nvidia buys an AI startup for $20 billion, it’s largest acquisition to date

Nvidia (NVDA) announced its largest transaction to date on Friday, agreeing to a $20 billion deal involving artificial intelligence chip startup Groq. The arrangement is structured as a non-exclusive licensing agreement rather than a full acquisition.

Under the agreement, Nvidia will license Groq’s inference chip technology and integrate it into future products. Several of Groq’s senior executives, including founder and chief executive Jonathan Ross, will join Nvidia as part of the deal.

Groq was founded in 2016 by former Google engineers. Ross previously helped develop Google’s Tensor Processing Unit, a custom chip used for AI inference workloads. The technology and expertise behind that work are central to the agreement, according to people familiar with the matter.

Alex Davis, chief executive of Disruptive, which led Groq’s most recent funding round, said the deal was completed quickly. Disruptive has invested more than $500 million in Groq since its founding.

Groq raised $750 million in September at a valuation of about $6.9 billion. Investors included BlackRock, Neuberger Berman, Samsung, Cisco, Altimeter, and 1789 Capital. The company said at the time that the funds would be used to expand data center capacity.

In a blog post, Groq said it entered a non-exclusive licensing agreement with Nvidia and that GroqCloud would continue operating independently. Groq will remain a standalone company with a new chief executive, finance chief Simon Edwards.

Nvidia said it paid for the right to use Groq’s technology and will integrate the chip designs into its AI platforms. Some Groq executives will assist with scaling the licensed technology.

The deal surpasses Nvidia’s previous largest acquisition, the $7 billion purchase of Mellanox in 2019. At the end of October, Nvidia reported $60.6 billion in cash and short-term investments.

In an internal email, Nvidia chief executive Jensen Huang said the agreement would expand Nvidia’s capabilities in AI inference and real-time workloads. Groq has been targeting annual revenue of $500 million amid strong demand for AI accelerator chips.