Nvidia has entered into a licensing agreement with Groq, an inferencing chip designer, acquiring the rights to some of its technology while also hiring key executives from the company. This strategic move is aimed at diversifying Nvidia’s supply chains and tapping into new markets while avoiding full acquisition and the associated antitrust implications.
Nvidia’s spokesperson confirmed that they have secured a non-exclusive license for Groq’s intellectual property and brought in engineering talent from Groq, but they did not finalize a purchase of the company. Groq specializes in chips designed for AI inferencing, known as language processing units (LPUs), which are more power-efficient and affordable compared to Nvidia’s GPUs, which are currently focused on training AI models. As AI usage evolves, the need for optimized inferencing devices is expected to rise.
Groq has a significant service offering known as GroqCloud, where it provides its chips on a rental basis. On December 24, Groq officially announced the licensing agreement, stating that key figures, including Jonathan Ross, Groq’s Founder, and Sunny Madra, its President, have moved to Nvidia to further develop and scale the technology.
The deal may prove to be extremely valuable, potentially reaching up to $20 billion as reported by TechCrunch.
There are broader implications for Nvidia as it faces supply chain challenges, particularly a shortage of high-bandwidth memory for AI applications. Nvidia’s CFO highlighted that some of their chips are currently "sold out" or "fully utilized." Groq’s chips, unlike Nvidia’s, use static RAM, which is faster and less power-hungry, and is currently not facing the same scarcity issues as high-bandwidth memory used by Nvidia’s offerings.
By opting for a licensing agreement instead of a full acquisition, Nvidia not only sidesteps the complexities of taking over Groq’s service business, especially as it seems to be retreating from its own DGX cloud services, but it also avoids significant antitrust scrutiny.
Although Nvidia refrained from disclosing the names and roles of the Groq executives it hired, it’s indicated that Jonathan Ross has taken on the role of chief software architect at Nvidia, while Sunny Madra now serves as vice president of hardware. Groq will continue under the leadership of Simon Edwards, who recently joined the company as CFO.
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