Nvidia (NVDA) shares inched higher Friday to lead tech stocks as the company confirmed a deal with AI chip startup Groq.
CNBC reported Wednesday shortly before the market close that Nvidia was set to acquire Groq for $20 billion.
Shortly after the report, Groq said it entered a non-exclusive deal to license its tech to Nvidia. The startup also said Nvidia has hired its founder, Jonathan Ross, and its president, Sunny Madra, as well as other employees to “help advance and scale the licensed technology.”
Ross is also the creator of Google’s (GOOGL) TPUs — the primary source of competition for Nvidia’s GPUs.
A spokesperson for Nvidia confirmed the details shared by Groq in a statement to Yahoo Finance and clarified that the AI giant has not acquired the startup.
“The move appears strategic in nature for NVDA as they leverage their increasingly powerful balance sheet to maintain dominance in key areas,” Bernstein analyst Stacy Rasgon wrote in a note to clients this week of the news.
Groq makes LPUs (language processing units), geared toward AI inferencing and marketed as alternatives to Nvidia’s GPUs (graphics processing units) and Google’s TPUs (tensor processing units). A key difference is that LPUs utilize a type of memory technology called SRAM within the chips, whereas Nvidia GPUs rely on off-chip HBM made by companies like Micron (MU) and Samsung (005930.KS).
Groq argues that the on-chip SRAM results in faster execution of AI workloads, but some analysts say the limited memory capacity of that SRAM makes the upstart’s LPUs less useful.
“Groq’s current technology is greatly limited to only a small subset of inference workloads,” wrote DA Davidson analyst Alex Platt in a note Friday. “[W]e find it hard to believe there aren’t better assets in the same market for NVIDIA to take a look at.”