In a landmark move that reshapes the artificial intelligence semiconductor landscape, industry titan Nvidia has entered into a staggering $20 billion licensing agreement with the chip startup Groq. This strategic pact, announced on Christmas Eve, grants Nvidia access to Groq's specialized technology for running AI applications, a critical area known as inference, and effectively neutralizes a potential competitor in the graphics processing unit (GPU) space.
The Anatomy of a $20 Billion Agreement
The deal represents a monumental shift for Groq, a company that was founded nearly a decade ago and faced severe financial difficulties. Groq founder Jonathan Ross revealed on the 20VC podcast that the startup once nearly exhausted its funds and proposed employees swap salaries for equity. The agreement with Nvidia marks a dramatic reversal of fortune.
According to insiders familiar with the negotiations, the relationship between Ross and Nvidia's CEO Jensen Huang warmed significantly over the past two months. The two were reportedly together in November at the U.S.–Saudi Investment Forum in Washington, D.C., before finalizing the deal.
Under the terms of the non-exclusive license, Nvidia is paying a total of $20 billion. Approximately $13 billion has already been transferred to Groq, with the remaining balance scheduled for payment in the coming months. This total sum includes stock packages for Groq employees who will be joining Nvidia. Notably, the payments are not linked to any future performance milestones.
Windfalls and Strategic Gains
The financial rewards for Groq's founder and investors are substantial. Jonathan Ross, a former Google engineer who contributed to the creation of its Tensor Processing Units (TPUs), is receiving an Nvidia stock package valued at at least several hundred million dollars. Ross owns about 10% of Groq, a stake now worth around $2 billion based on the deal's headline value.
Other major investors poised for significant returns include venture firm Disruptive, Groq's largest outside backer, which led its last funding round at a $6.9 billion valuation. Chamath Palihapitiya’s Social Capital, asset management giant BlackRock, and Donald Trump Jr.’s 1789 Capital are also among the beneficiaries. Groq is expected to soon distribute proceeds to its investors and employees.
For Nvidia, the deal is a strategic masterstroke in the intensifying AI chip war. It not only provides access to cutting-edge inference-chip technology but also prevents Groq from emerging as a serious alternative in the GPU market. This comes as competition for top AI talent and proprietary technology reaches a fever pitch.
Groq's Trajectory and What Comes Next
Prior to the deal, Groq was on a high-growth revenue path, largely fueled by sovereign clients like Saudi Arabia's Aramco. Internal financial projections seen by sources indicated the company expected revenue to hit about $500 million this year, up from roughly $90 million in 2024, with a target of $1.4 billion in 2026.
The story does not end with the licensing agreement. The remaining assets of Groq, including its AI-inference platform GroqCloud, are now up for sale. People with knowledge of the situation anticipate at least six bids for this portion of the business, with offers expected to exceed $1 billion. Simon Edwards, Groq's Chief Financial Officer, has been appointed as the new CEO to oversee this next phase.
This $20 billion transaction underscores the immense value and fierce competition in the foundational technology powering the global AI revolution, with Nvidia making a decisive move to consolidate its dominance on the critical inference front.
