Nvidia Corp. has reached a non-exclusive licensing agreement with artificial   intelligence   ( AI )   chip startup Groq covering inference technology, the companies announced Wednesday, shortly after CNBC reported that Nvidia agreed to acquire Groq for approximately $20 billion in what would mark the chipmaker's largest-ever acquisition.

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Groq confirmed the licensing deal but made no mention of an acquisition in its statement. The company said it will continue to operate independently with Simon Edwards stepping into the CEO role, while founder Jonathan Ross and other executives join Nvidia to advance the licensed technology. Groq's cloud business will remain operational.

According to Alex Davis, CEO of Disruptive, which led Groq's September funding round, Nvidia is purchasing Groq for $20 billion in cash. Davis told CNBC the deal excludes Groq's nascent cloud business. Nvidia CFO Colette Kress declined to comment on the transaction.

The deal would dwarf Nvidia's previous record acquisition, the   $7   billion takeover of   Israli   chip   designer   Mellanox   in 2019. at the end   of October, Nvidia held $60.6 billionin cash and short-term investments, up from $13.3   billion in early   2023.

Licensing Agreement Details

Under the announced licensing agreement, Groq will grant Nvidia non-exclusive rights to its inference technology, reflecting what the companies described as a shared focus on expanding access to high-performance, low-cost AI inference.

Ross, Groq's founder, along with President Sunny Madra and other team members will join Nvidia to help scale the technology. GroqCloud will continue operating without interruption, Groq said.

Rapid Deal Timeline

Davis said the acquisition came together quickly, just three months after Groq raised $750million   at   a   $6.9 billion valuation.

The September round included investments from BlackRock, Neuberger Berman, Samsung, Cisco, Altimeter and 1789 Capital, where Donald Trump Jr. is a partner.

Groq was targeting $500 million in revenue this year and was not actively pursuing a sale when Nvidia approached, according to CNBC.

Groq's Background and Market Position

Founded in 2016, Groq develops AI accelerator chips designed to challenge Nvidia's dominance in the AI infrastructure market. Ross, the company's CEO, previously helped create Google's Tensor Processing Unit while working at the tech giant. Initial SEC filings listed Ross and Douglas Wightman, a former Google X engineer, as principals.

Groq's products, which the company calls language processing units or LPUs, function as specialized inference engines optimized for running AI models quickly and efficiently.

The startup offers both cloud services and on-premises hardware configurations, supporting open versions of models from Meta, DeepSeek, Qwen, Mistral, Google and OpenAI.

Groq says it now powers AI applications for more than 2 million developers.

Funding History

Before September's   $750 million round, Groq raised $640 million   at a   $2.8 billion valuation in August, 2024,   more   than   doubling its valuation within a year.

PitchBook estimates the company has raised over   $3   billion to date. Disruptive, which led the latest funding, invested nearly $350 million in Groq.

The startup had not publicly announced IPO plans before the Nvidia deal emerged. By contrast, competitor Cerebras Systems withdrew its IPO filing in October after raising over   $1 billion at an $8.1 billion valuation, citing only that it did not intend to conduct an offering "at this time."