In a significant move within the artificial intelligence hardware landscape, chip giant Nvidia has entered into a major agreement with the AI chipmaking startup Groq. The deal, structured as a non-exclusive licensing agreement, was announced last week and is reported to be valued at a staggering $20 billion. This partnership is set to result in substantial financial payouts for Groq's shareholders and employees, while allowing the startup to continue its operations independently under new leadership.
Financial Windfall for Shareholders and Joining Employees
While the precise financial terms remain undisclosed by both companies, reports citing sources indicate a lucrative outcome for those invested in Groq. A significant portion of Groq's shareholders are expected to receive payments calculated on the basis of the $20 billion valuation. The payout structure is reportedly split, with about 85% paid upfront, another 10% scheduled for mid-2026, and the final installment due by the end of 2026.
The agreement also triggers a major transition for Groq's workforce. The startup's founder and CEO, Jonathan Ross, and its president, Sunny Madra, are set to move to Nvidia. They will be joined by approximately 90% of Groq's employees. Employees making this shift will receive cash for their vested shares in Groq. For unvested shares, they will be compensated at the $20 billion valuation, but the payment will be made in Nvidia stock that vests over a period of time.
Furthermore, a select group of about 50 employees will see their entire stock packages accelerated and paid out entirely in cash. It's important to note that the agreement does not involve any transfer of equity or ownership of shares from Groq to Nvidia.
Groq's Future as a Standalone Company
Despite the exodus of most of its original team to Nvidia, Groq will not be absorbed. The company confirmed it will continue to operate as an independent, standalone entity. The helm will now be taken by Simon Edwards, the former Chief Financial Officer (CFO) of Groq, who steps into the role of the new Chief Executive Officer.
Employees who choose to remain with Groq are also set to benefit. They will be paid for their vested shares and will receive a compensation package that includes economic participation in the ongoing company. In a notable employee-friendly clause, any Groq staff member, regardless of whether they stay or leave, who has been with the company for less than one year will have their vesting cliff removed, enabling them to receive some upfront payment.
In an official blog post, Groq stated the agreement reflects a shared focus on expanding access to high-performance, low-cost inference. The company assured that its GroqCloud service will continue to operate without any interruption.
Strategic Implications in the AI Chip Arena
This unusual deal structure—a licensing partnership rather than a full acquisition—is becoming an increasingly common tactic among major AI players. It allows companies like Nvidia to access critical technology and talent while potentially avoiding the intense regulatory scrutiny and antitrust problems associated with outright acquisitions.
Groq has made a name for itself with its custom-designed Language Processing Unit (LPU), a chip specialized for AI inference, which is the process where trained AI models generate predictions or make decisions. The startup was valued at $6.9 billion just three months ago after raising $750 million in its latest funding round, making the reported $20 billion deal valuation a remarkable leap.
The backgrounds of Groq's founders add an interesting layer to this narrative. Both Jonathan Ross and engineer Douglas Wightman previously worked at Google, where they contributed to developing the company's first Tensor Processing Unit (TPU). TPUs are Google's specialized chips that compete directly with Nvidia's GPUs for running large-scale machine learning workloads, highlighting the deep expertise Nvidia is bringing in-house through this deal.
