NVIDIA Inks Record $20B Deal for Groq's AI Inference Tech
Shares climb as NVIDIA secures non-exclusive license and key talent from the AI chip startup to dominate the fast-growing inference market.
NVIDIA Corp. (NASDAQ: NVDA) has entered into a landmark $20 billion non-exclusive licensing agreement for the technology and talent of AI chip startup Groq, a move that solidifies its dominance in the artificial intelligence sector and signals a major strategic push into the burgeoning inference market. The deal, NVIDIA’s largest financial commitment to date, sent shares higher as investors and analysts digested the implications of the massive investment.
Under the terms of the agreement, NVIDIA will license Groq’s cutting-edge AI inference technology and integrate its low-latency processors into the company's AI platforms. In a maneuver widely seen as an “acquihire,” the deal also brings Groq's visionary founder, Jonathan Ross, and other key personnel into NVIDIA's fold to spearhead the new initiative. Despite the scale of the deal and the transfer of its leadership, Groq will reportedly maintain its operational independence, with its GroqCloud business continuing as a separate entity.
The strategic rationale behind the deal lies in the evolving landscape of artificial intelligence. While NVIDIA’s powerful GPUs have become the industry standard for AI training—the process of teaching models on vast datasets—the industry is rapidly shifting focus to AI inference, the application of trained models to make real-time decisions. Groq, founded by former Google engineers who developed the Tensor Processing Unit (TPU), specializes in this area with its proprietary Language Processing Units (LPUs). These chips are designed specifically for high-speed, low-latency inference, a critical requirement for applications like chatbots, real-time language translation, and autonomous systems. This deal gives NVIDIA access to a best-in-class architecture purpose-built for this next phase of AI deployment.
Wall Street reacted positively to the strategic move, with NVIDIA stock trading at $188.61 in Wednesday's session. The deal drew immediate commentary from analysts, with Bank of America’s Vivek Arya reiterating a “Buy” rating and calling NVIDIA a “top sector pick.” Arya noted the deal's strategic importance was comparable to the company's successful acquisition of Mellanox, suggesting that future NVIDIA systems could feature both GPUs and Groq LPUs in the same server rack to optimize different AI workloads.
Baird analyst Tristan Gerra also reaffirmed an “Outperform” rating with a $275 price target, stating the move aligns with NVIDIA's strategy as AI workloads increasingly shift toward inference. However, not all were without questions. Bernstein analyst Stacy Rasgon commented that “$20B seems expensive for a licensing deal,” though he conceded it was “still pocket change for NVDA,” which boasts a market capitalization that has swelled to over $4.5 trillion. Rasgon also pointed to potential antitrust scrutiny, suggesting the non-exclusive structure might be designed to preempt regulatory challenges.
The $20 billion price tag dwarfs NVIDIA's previous largest transaction, the $7 billion acquisition of networking hardware firm Mellanox in 2019, underscoring the high-stakes battle for AI supremacy. The move is a direct challenge to competitors like AMD, Intel, and a host of venture-backed startups all vying for a piece of the AI inference market, which is expected to outgrow the training market in the coming years. By licensing Groq's high-performance technology and absorbing its top minds, NVIDIA is building a formidable moat around its AI ecosystem, aiming to provide an end-to-end solution for both training and inference at scale.