Nvidia has agreed to acquire assets from AI chip startup Groq for approximately $20 billion through a non-exclusive technology licence whilst simultaneously hiring the company's founders and executives, marking the chipmaker's largest transaction to date and dwarfing its previous record of $7 billion for Mellanox in 2019. Groq raised $750 million at a $6.9 billion valuation in September 2025, meaning the deal represents nearly a three-times valuation jump in just three months. This transaction positions Nvidia to extend its dominance in chip manufacturing by absorbing one of its most promising rivals in AI inference.
The deal follows Nvidia's established playbook of acquiring talent and intellectual property from startups whilst maintaining technical independence. CEO Jensen Huang stated in an internal email that Nvidia plans to integrate Groq's low-latency processors into the Nvidia AI factory architecture, addressing a critical market need as reports indicate Groq's chips can perform inference tasks up to 10 times faster than comparable Nvidia hardware whilst consuming less power. Groq's growth has been significant, with the company powering AI applications for more than 2 million developers, up from approximately 356,000 in 2024. As of the end of October, Nvidia had $60.6 billion in cash and short-term investments on its balance sheet, up from just $13.3 billion in early 2023, providing substantial financial capacity for such acquisitions.
The transaction underscores how the AI chip arms race is consolidating, as Nvidia is essentially removing a potential challenger whilst extending its own capabilities in the booming market for AI accelerator chips used to speed up inference tasks. By structuring the deal as a non-exclusive licence, Nvidia maintains the appearance of competition whilst consolidating power in a sector where its existing chips are often too large and expensive for running practical applications such as chatbots. The acquisition of Groq, which was one of the most promising rivals to Nvidia's inference dominance, demonstrates how the chipmaker is leveraging its substantial financial resources to cement its position in AI chip manufacturing.
Sources:
1. https://techcrunch.com/2025/12/24/nvidia-acquires-ai-chip-challenger-groq-for-20b-report-says/
2. https://www.techbuzz.ai/articles/nvidia-snaps-up-groq-in-record-20b-ai-chip-acquisition
3. https://www.bitget.com/news/detail/12560605122443
