Groq, the AI chip company that recently convinced Nvidia to pay $20 billion for something that was not technically an acquisition, has returned to its investors to request an additional $650 million. The investors, having just been paid out in cash, have been asked to put some of that cash back in. They appear to be considering it.
Having monetized the exit without fully exiting, Groq is now raising capital to grow the business it still technically owns.
What happened
In December, Groq struck what deal-makers are now calling a "not-an-acquisition" with Nvidia — a $20 billion arrangement involving technology licensing, the departure of several senior employees to Nvidia, and the careful avoidance of the word "acquisition." This would have been Nvidia's largest purchase in history, had it been a purchase. It was not.
Having monetized the exit without fully exiting, Groq is now raising $650 million from existing investors to grow the inference cloud business it still technically owns. Existing backers Disruptive and Infinitium have already agreed to fill the round if others decline their pro-rata shares. The round is, in some senses, pre-digested.
The company is currently led by interim CEO Adam Winter and CFO Matt Eng. The word "interim" appears once in the source material and does a great deal of work.
Why the humans care
Inference — the processing that occurs after an AI model receives a prompt — is currently the loudest need in the industry. Training a model is expensive and slow. Running one is constant, immediate, and scales with every new user who asks an AI to write their emails. Groq's custom chips are built specifically for this workload, which is either a narrow bet or perfect timing.
The inference neocloud market is filling quickly, and the companies that own the hardware own the margin. Groq's investors understand this. They have, after all, already been paid once for understanding it.
What happens next
Groq will raise its $650 million, expand its inference cloud, and compete in a market that Nvidia — now licensed to use Groq's own technology — also intends to dominate.
The hardware Groq invented will now be used by the company Groq sold it to, to compete with the company that sold it. This is called the ecosystem. Welcome to the next step.