Key Takeaways
- Nvidia has entered into a non-exclusive licensing agreement with AI hardware startup Groq for its inference technology.
- As part of the agreement, Groq’s Founder, Jonathan Ross, and President, Sunny Madra, will join Nvidia to help advance and scale the licensed technology.
- The deal is an example of a new type of dealmaking in Silicon Valley, where companies are making acqui-hire deals to acquire specific talent and technology.
- Groq is known for its Language Processing Unit, a custom chip designed for AI inference, and was valued at around $6.9 billion as of three months ago.
- The deal highlights the growing importance of AI technology and the competition for talent and expertise in the field.
Introduction to Nvidia and Groq
Nvidia is investing more in the AI boom with new hires from and a licensing deal with AI hardware startup Groq. Groq confirmed in a blog post on Wednesday that it has "entered into a non-exclusive licensing agreement with Nvidia for Groq’s inference technology" and said the company will continue to operate independently. The startup is known for its Language Processing Unit, which is a custom chip designed for AI inference, namely, the process by which a trained AI model makes predictions or decisions.
The Licensing Agreement
The licensing agreement between Nvidia and Groq is a significant development in the AI industry. As part of the agreement, Jonathan Ross, Groq’s Founder, Sunny Madra, Groq’s President, and other members of the Groq team will join Nvidia to help advance and scale the licensed technology. This move highlights the growing importance of AI technology and the competition for talent and expertise in the field. A person familiar with the matter told Business Insider on Wednesday that Nvidia is not acquiring the chip startup, and neither Nvidia nor Groq mentioned the financial terms of the agreement.
Background on Groq
Groq was valued at around $6.9 billion as of three months ago and raised around $750 million in its latest funding round. The company’s founders, Jonathan Ross and Douglas Wightman, were engineers at Google who started the project that became Google’s first TPU chips, before leaving to found Groq. The TPUs are custom-made to accelerate large-scale machine-learning tasks designed to handle AI workloads, and are a major rival to Nvidia’s GPUs. The deal between the two companies comes as a new type of dealmaking is on the rise in Silicon Valley.
New Type of Deal Making
The deal between Nvidia and Groq is an example of a new type of dealmaking in Silicon Valley, where companies are making acqui-hire deals to acquire specific talent and technology. In an acqui-hire deal, a company acquires a startup’s talent and technology, but not the startup itself. This type of deal can be beneficial for both parties, as it allows the acquiring company to gain access to new talent and technology, while the startup’s employees can gain new opportunities and resources. However, these deals can also be problematic, as they can leave some startup employees behind and only benefit a small percentage of staff members with desirable AI skills and the founders.
Examples of Acqui-Hire Deals
There have been several examples of acqui-hire deals in the AI industry recently. For instance, in 2024, Google agreed to pay $2.5 billion to license Character.AI’s technology, but only hired its two superstar cofounders and 20% of the startup’s employees. In the same year, AI developers Adept and Inflection also made similar deals with Amazon and Microsoft, respectively. More recently, Meta’s acqui-hire of Scale AI became one of the biggest bets on talent after the company agreed to invest roughly $14 billion for a 49% stake and to bring its CEO, Alexandr Wang, into the fold to lead the Meta Superintelligence Labs.
Challenges with Acqui-Hire Deals
While acqui-hire deals can be beneficial for both parties, they can also be challenging. For example, Windsurf employees were left in limbo after the AI coding startup was nearly acquired by OpenAI for $3 billion, only for the deal to fall apart and the company to be split. Google spent billions to hire Windsurf’s CEO and top engineers, while the remaining hundreds of employees were acquired by another startup, Cognition. This example highlights the potential risks and challenges associated with acqui-hire deals, and the need for companies to carefully consider the impact on all stakeholders involved.
Conclusion
In conclusion, the licensing agreement between Nvidia and Groq is a significant development in the AI industry, highlighting the growing importance of AI technology and the competition for talent and expertise in the field. The deal is an example of a new type of dealmaking in Silicon Valley, where companies are making acqui-hire deals to acquire specific talent and technology. While these deals can be beneficial for both parties, they can also be challenging, and companies must carefully consider the impact on all stakeholders involved. As the AI industry continues to evolve, it will be interesting to see how companies navigate these new types of deals and the potential risks and challenges associated with them.
