Tech Explained: Here’s a simplified explanation of the latest technology update around Tech Explained: Nvidia Secures Groq’s AI Inference Technology in Landmark Deal, Hires Founder and CEO Jonathan Ross in Simple Termsand what it means for users..
Nvidia has entered into a non-exclusive licensing agreement for Groq’s advanced inference technology, while hiring Groq’s founder and CEO Jonathan Ross along with several key executives, the companies announced on Wednesday.
The deal, described by sources as valued at approximately $20 billion in cash, represents Nvidia’s largest transaction to date and effectively integrates Groq’s innovative Language Processing Unit (LPU) architecture into Nvidia’s ecosystem. Groq, a nine-year-old startup specializing in high-speed AI inference chips, will continue operating independently, with its cloud service GroqCloud remaining uninterrupted under new leadership.
Groq’s official blog post framed the arrangement as a “non-exclusive licensing agreement” that allows Nvidia to leverage its inference technology. As part of the pact, Jonathan Ross—a former Google engineer who played a pivotal role in developing the Tensor Processing Unit (TPU)—along with President Sunny Madra and other senior team members, will join Nvidia to “advance and scale the licensed technology.”
Nvidia CEO Jensen Huang emphasized the strategic fit, stating that the addition of talent and intellectual property strengthens the company’s offerings without a full company acquisition. The structure mirrors Nvidia’s earlier deal with networking startup Enfabrica, where it licensed technology and hired key staff for over $900 million.
Groq has emerged as a formidable challenger to Nvidia in AI inference—the phase where trained models generate responses to user queries. Its LPU chips, using a deterministic tensor streaming architecture and on-chip SRAM memory, have claimed superior speed and energy efficiency compared to traditional GPUs for certain workloads. The startup, valued at $6.9 billion following a $750 million funding round in September, was not actively seeking a sale when approached by Nvidia, according to investor sources.
The transaction excludes Groq’s nascent cloud inference business, which will persist under interim CEO Simon Edwards. This carve-out aims to avoid conflicts with Nvidia’s major cloud customers like Amazon, Microsoft, and Google, who rely heavily on Nvidia hardware.
Industry analysts view the deal as a defensive play by Nvidia amid intensifying competition in inference, where rivals like AMD, Intel, Cerebras, and custom chips from hyperscalers are gaining ground. As AI shifts from model training to real-time deployment, inference is projected to drive significant future revenue growth.
Jonathan Ross, credited with pioneering custom AI accelerators at Google, brings deep expertise that could accelerate Nvidia’s next-generation inference solutions. Groq’s technology avoids reliance on high-bandwidth memory (HBM), sidestepping supply constraints that have plagued the industry.
The announcement, leaking on Christmas Eve, underscores Nvidia’s aggressive strategy to maintain dominance in the AI chip wars. Shares of Nvidia reacted positively in after-hours trading, reflecting investor confidence in the bolstered portfolio.
Groq investors, including Disruptive (which led the recent round), BlackRock, and others, stand to benefit substantially from the premium valuation implied by the deal terms.
As regulatory scrutiny of Big Tech consolidations intensifies, the licensing-and-talent structure may help navigate potential antitrust concerns. The deal is expected to close swiftly, positioning Nvidia even more firmly at the forefront of AI hardware innovation.