Nvidia’s licensing deal with chip startup Groq showcases the tech giant’s use of its cash reserves to maintain dominance in the AI market. The $20 billion agreement includes hiring Groq’s founder and CEO, Jonathan Ross, and other employees, marking Nvidia’s largest-ever deal.
Bernstein analyst Stacy Rasgon sees the Nvidia-Groq deal as strategic for Nvidia, leveraging its strong balance sheet to stay ahead in key areas. Nvidia’s cash inflow surged over 30% to $22 billion in the most recent quarter, reinforcing its position in the market.
The Nvidia-Groq deal, seen as an acquisition without being labeled one, adds to a series of AI investments by Nvidia, now a $5 trillion company. Nvidia’s investments span the market, from language model developers like OpenAI and xAI to neocloud companies like Lambda and CoreWeave.
Nvidia’s involvement in circular financing schemes has raised questions, but the company denies any wrongdoing. Groq, positioning itself as a rival to Nvidia, specializes in the creation of LPUs for AI inferencing, offering an alternative to Nvidia’s GPUs.
Groq aims to provide chips for half the world’s AI inference needs at a lower cost. CEO Jonathan Ross emphasizes driving down compute costs annually. Nvidia’s acquisition of Groq talent and IP positions the company to gain a larger share of the inference market, playing both offense and defense in AI.
Nvidia’s move to acquire Groq talent and IP was met with confusion and skepticism on Wall Street. While some analysts see potential for Nvidia to dominate the inference market further, others question Groq’s technology’s limitations for large AI models due to low memory capacity.
Nvidia’s shares rose around 1% following the announcement of the Groq deal. The tech company’s strategic moves in the AI space are closely watched by analysts and investors, given the potential impact on the market and Nvidia’s position in the industry.
Read more at Yahoo Finance: Nvidia’s Groq deal underscores how the AI chip giant uses its massive balance sheet to ‘maintain dominance’