Groq raises $350 million after ditching its own chips for Nvidia's
Once an Nvidia rival, the startup is now an Nvidia customer. Here is what happened and what it means for the cloud companies racing to run your AI.
Key points
- Groq raised $350 million in a round led by investment firm Disruptive, with Nvidia among the planned participants.
- The new deal values Groq at $3.5 billion, down from $6.9 billion in September 2024.
- Groq shifted from building its own AI chips to operating Nvidia-powered data centres after Nvidia hired its founder and top team.
- The company now runs 13 data centres across four regions and serves more than 6 million developers and businesses.
- Groq plans to grow its power capacity from 54 megawatts to over 200 megawatts by 2027.
Groq used to want to beat Nvidia. Now it buys from them.
The California startup just closed a $350 million funding round, first reported by TechCrunch, to fund a sharp turn in its business. Groq had spent years building its own custom chips, called LPUs (language processing units, designed specifically to run AI at speed), to take on Nvidia. That plan collapsed after Nvidia hired founder Jonathan Ross and several senior colleagues as part of a licensing deal, stripping the startup of its core team.
What does Groq actually do now?
Groq is now a neocloud: a company that rents out computing power rather than building the chips inside the machines. Thirteen data centres span four continents, and the company says it serves more than 6 million developers, enterprises, and AI-native companies. The chips doing the actual work are Nvidia's, which makes Groq a paying customer of the company it once aimed to undercut.
Chairman and CEO Alex Davis, who also runs Disruptive, put the direction bluntly in a statement: "Inference will without a doubt become the largest and most critical layer of AI infrastructure." Inference is the computing work a system does every time it answers a question or completes a task, distinct from the upfront effort of training it.
Should investors be worried about the lower valuation?
The company's value has fallen from $6.9 billion to $3.5 billion, yet Groq doesn't see it as a down round. A spokesperson described it to TechCrunch as a fresh starting point for the post-licensing-deal version of the company, essentially arguing the old number belonged to a different business.
Wider doubts about the neocloud model haven't gone away. CoreWeave posted strong revenue growth but still rattled investors with heavy debt and hardware that depreciates quickly. Groq's own finances stay private. As we reported on 13 August, Nvidia is simultaneously financing many of these same customers while protecting the long-term value of its chips, so the chipmaker profits from Groq's pivot regardless of whether neoclouds ever turn a profit.
| Milestone | Detail |
|---|---|
| June 2025 round | $650 million raised to begin the pivot |
| Latest round | $350 million, led by Disruptive |
| Current valuation | $3.5 billion |
| Previous valuation | $6.9 billion (September 2024) |
| Data centres today | 13 across four global regions |
| Power target by 2027 | 200-plus megawatts |
What does this mean for ordinary users and businesses?
If your company uses AI tools running on rented cloud computing, the neocloud race matters to you. More competition for Nvidia capacity could push pricing in buyers' favour over time. Groq is pitching at businesses that need medium to large compute clusters for training and running AI models.
Nvidia collects revenue from Groq and rivals like CoreWeave and Lambda, and has invested directly in several of them. It's the one player that wins whichever neocloud comes out on top.
