By Adam Clark
Nvidia was edging down early on Monday. Broader jitters about the technology sector looked to be hurting the stock, while Wall Street assessed the reported $20 billion price tag put on Nvidia's agreement to license technology from artificial intelligence chip start-up Groq.
Nvidia shares were down 1.1% at $188.49 in premarket trading. The move was in line with the wider market, as futures tied to the technology-heavy Nasdaq 100 lost 0.4%. Among other chip makers, Advanced Micro Devices was down 0.9% and Broadcom was falling 0.9% in premarket trading.
The main news in the AI chip sector is Nvidia's recent agreement to purchase a nonexclusive license for technology from privately held Groq.
The deal valued Groq at around $20 billion and will involve Nvidia hiring many of Groq's key employees, according to reports by CNBC and The Information.
Nvidia didn't immediately respond to a request for comment on Monday.
Groq specializes in chips for inference -- producing output from AI models. It calls its hardware language processing units, or LPUs, and was last valued at $6.9 billion in a $750 million September funding round.
"We find it hard to believe there aren't better assets in the same market for Nvidia to take a look at," wrote D.A. Davidson analyst Alex Platt in a research note, arguing the limited memory capacity of Groq's current chips means its hardware isn't suitable for many inference tasks.
The reported price for Groq's technology surprised other Wall Street analysts, too.
"The (unconfirmed) $20 billion price that Nvidia is paying is certainly large in absolute terms, and even relative to Groq's revenue, which we have seen estimated at between $90 million and $500 million," wrote Truist Securities analyst William Stein.
However, Stein also noted the deal represents less than half of Nvidia's net cash and less than its expected free cash flow for the current quarter, while potentially fortifying its competitive position against the threat from Google's Tensor Processing Units, or TPUs.
"Because Groq's leadership formerly worked on the TPU project, we believe Groq's LPU architecture is likely similar to that of the TPU, and designed for better latency and energy performance in large scale inference," wrote Stein. "Nvidia's further development of Groq's technology could make Nvidia's capabilities more appealing to high volume inference customers."
Write to Adam Clark at adam.clark@barrons.com
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December 29, 2025 08:19 ET (13:19 GMT)
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