UBS Securities' research report titled "US Semiconductors and Semi Equipment SemiBytes: Our Thoughts on NVDA/Groq," published on December 29, 2025, and produced by a six-analyst team, provides an in-depth analysis of NVIDIA's (NVDA.US) $20 billion non-exclusive licensing agreement with Groq and its industry implications. The core of the deal lies in NVIDIA's adoption of Groq's LPU (Language Processing Unit) technology—a solution specifically engineered for high-speed inference that utilizes 230MB of on-chip SRAM and 80TB/s bandwidth to address latency issues caused by traditional GPUs accessing off-chip HBM (with 288GB capacity and 3.35TB/s bandwidth), reportedly achieving more than a 7.5x improvement in inference throughput. Groq's founder, along with other key executives including former Google TPU developers, will join NVIDIA to drive technology integration, while Groq will maintain independent operations and continue offering its GroqCloud service, supporting models such as Llama3 and Mistral 8x7B.
From a market strategy perspective, this collaboration enables NVIDIA to penetrate the high-speed inference application market—a niche segment that, while not traditionally a GPU stronghold, represents one of the fastest-growing sectors within the inference market. The technology integration is expected to create synergies with NVIDIA's existing product lines: LPU technology is planned for incorporation into the AI Factory architecture, working alongside the Rubin CPX (a long-context window inference accelerator) and Dynamo (a multi-tenant rack operating system) to build an expansion framework centered on a "single platform + system-level product portfolio," aiming to cover broader LLM ultra-low latency application scenarios.
Regarding financial projections, UBS believes upward momentum for the stock price will primarily come from earnings per share (EPS) revisions, anticipating that the 2026 price-to-earnings ratio will remain around 20x, corresponding to market expectations for 2026 EPS of approximately $9-$9.50, while beginning to focus on 2027 visibility. Valuation employs multiple methodologies including P/E and enterprise value to free cash flow (EV/FCF), while clearly highlighting risk factors: systemic risks such as macroeconomic volatility, international trade disruptions, technological disruption, and business model innovation, along with NVIDIA-specific challenges including competition from AMD, intense battles in the ARM application processor space, and emerging competition from Intel.
The report also discloses that UBS has published its 2026 U.S. semiconductor industry outlook and over 180 pages of comprehensive analysis slides, covering full-dimensional information including end-market commentary, forecast models, popular research topics, and individual stock investment theses/risks. It emphasizes that investors should consider this report as one reference factor in their decision-making process, while noting that UBS Securities may have potential conflicts of interest due to business relationships. The overall analysis indicates that UBS maintains a positive stance on NVIDIA, believing this transaction will strengthen its competitiveness in the high-speed inference market and expand market share through its system-level product portfolio, while also clearly advising cautious evaluation of relevant risk factors.
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