Nvidia has consented to spend $20 billion on AI chip startup Groq to license its AI inference technology, while hiring multiple employees, including the founder, in a surprising agreement that highlights the increasing competition for AI chip supremacy.

Groq announced that it has signed a non-exclusive licensing deal with Nvidia to offer broader availability of its low-cost, high-performance inference chips. To facilitate the progression and expansion of the licensed technology, Groq CEO Jonathan Ross, president Sunny Madra, and additional members of the AI chip startup will be transitioning to Nvidia. Simon Edwards will be the new CEO of Groq, which will remain an independent company despite the partnership with Nvidia.

Although the complete financial specifics have yet to be revealed, the $20 billion licensing agreement is said to be Nvidia’s biggest acquisition of any technology to date. It is nearly three times Groq’s $6.9 billion valuation following a $750 million financing round that took place just a few months earlier. The non-exclusive licensing contract is important due to two key developments influencing the AI sector.

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The Groq deal arises alongside an increasing narrative suggesting that Nvidia's dominant hold on the AI chip market is breaking apart. It indicates that the industry leader recognizes the strategic importance of licensing and adopting inference technology from its new competitors, despite the shift from training-focused GPUs that defined the initial phase of AI development to specialized silicon.

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Additionally, the agreement strengthens the pattern of acqui-hires in the AI sector, where possessing internal talent and specialized knowledge is becoming equally important as having access to the hardware or technology.

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Investors have been anxious regarding possible competition for Nvidia since its AI chip sector surged in mid-2023, shortly after OpenAI launched its groundbreaking ChatGPT. Since that time, Nvidia's quarterly income has grown from $7 billion to $57 billion. Leading hyperscalers like Google, Microsoft, Amazon, Meta, and Oracle have increasingly depended on Nvidia’s graphics processing units (GPUs) for training and creating their own AI models, in addition to leasing them to AI startups such as OpenAI and Anthropic.