Yesterday, the AI chip sector witnessed a significant development. Disruptive CEO Alex Davis revealed to the media that Nvidia has struck a deal to acquire the assets of AI chip startup Groq for around $20 billion in cash.

Should this transaction be finalized, it would stand as Nvidia's largest deal in its entire history.

However, Nvidia later issued a clarification, stating that this isn't a conventional acquisition. Rather, the two companies have forged an agreement centered on technology licensing and the acquisition of key talent. Groq will continue its operations as an independent entity.

This strategic move involving Groq has captured considerable attention within the industry. It not only has the potential to transform the landscape of the AI chip industry but also sheds light on the more profound strategic thinking and planning of the world's leading AI chip giant. This is evident in terms of technology roadmaps, talent competition, and regulatory oversight.

Established in 2016, Groq is a U.S.-based AI chip design firm with its headquarters in Mountain View, California. One of its co-founders, Jonathan Ross, played a pivotal role in designing Google's Tensor Processing Unit (TPU). This background endows Groq with technical expertise and a distinct perspective in AI inference chip design.

Groq's main focus lies in developing specialized AI inference accelerator chips, known as Language Processing Units (LPUs). These chips are designed to enhance the performance and efficiency of AI systems, such as large language models, during the inference phase. When compared to traditional GPUs and CPUs, LPUs offer advantages in memory bandwidth utilization and low-latency processing, representing a significant innovation in AI inference.

Over the years, Groq has drawn substantial capital interest. In September 2025 alone, the company secured a $750 million funding round, which valued it at approximately $6.9 billion. The investor lineup includes BlackRock, Neuberger Berman, Samsung, Cisco, Altimeter, and 1789 Capital (with Donald Trump Jr. among its partners).

As of 2025, Groq has expanded its data center footprint globally, with operations in North America, Europe, and the Middle East. Additionally, it has promoted its GroqCloud cloud inference service, enabling users to access its high-performance inference hardware via the cloud.

According to official announcements, Nvidia and Groq have entered into a non-exclusive licensing agreement. Under this agreement, Nvidia will obtain a license for Groq's AI inference technology and recruit key personnel, including Groq co-founder Jonathan Ross and company president Sunny Madra, to join its team.

Groq has also publicly declared that it will maintain its independent operations, with Chief Financial Officer Simon Edwards taking on the role of CEO. The licensed technology will be integrated into Nvidia's existing AI chip architecture, while Groq's GroqCloud service will remain unchanged.

This arrangement sidesteps the regulatory scrutiny that typically accompanies a full acquisition. It allows both companies to preserve the independence of their core businesses while engaging in in-depth technical collaboration.

AI inference pertains to the process where a model processes input data and generates output results during deployment. Unlike the training phase, inference places a premium on real-time performance, latency, and energy efficiency. With the widespread adoption of large language models (such as the GPT series, Gemini, etc.) in various applications, the significance of inference chips continues to rise.

Groq's LPU shines in low-latency and efficient inference, making it a valuable addition to traditional GPU architectures. By incorporating this technology and team, Nvidia can further bolster its competitiveness in the AI inference market.

Meanwhile, in 2025, Nvidia also unveiled plans to invest up to $100 billion in OpenAI and pledged to deploy at least 10 gigawatts of Nvidia hardware products. In the same month, it made an investment of approximately $5 billion in Intel, showcasing its multi-faceted strategic planning in the AI chip sector.

Although Groq will maintain its independent operations, the influx of capital, technology, and executive talent is bound to influence its development path. On one hand, Groq's technology can be more swiftly integrated into the mainstream AI chip ecosystem. On the other hand, its original independent product roadmap and business model may undergo modifications.

Groq is anticipated to continue its focus on inference chip technology and cloud services, while leveraging its partnership with Nvidia to promote its architectural innovations on a broader scale.

Currently, Nvidia remains the undisputed leader in the global AI chip market, holding a dominant position in both training and inference. By acquiring Groq's technology, Nvidia not only further cements its influence in the inference market but also lays the groundwork for developing more intricate and efficient AI chip products in the future.

References:

https://www.cnbc.com/2025/12/24/nvidia-buying-ai-chip-startup-groq-for-about-20-billion-biggest-deal.html

https://m.sohu.com/a/969157157_354973?scm=10001.325_13-325_13.0.0-0-0-0-0.5_1334&utm_source=chatgpt.com

https://en.wikipedia.org/wiki/Groq?utm_source=chatgpt.com

https://www.moomoo.com/hans/news/post/63287250/nvidia-and-groq-a-shortcut-to-sram-powered-inference?utm_source=chatgpt.com