Justice Department Investigates Nvidia’s Groq Deal for Antitrust Concerns
The US Justice Department is examining whether Nvidia deliberately structured its licensing deal with inference chip designer Groq to avoid antitrust review, according to a New York Times report.
Background
The investigation began shortly after the deal was announced in December, and the Justice Department has since sent Nvidia a formal request for information. While fines are possible, unwinding the deal is considered unlikely.
The Deal Structure
Nvidia took a non-exclusive license to Groq’s chip technology and hired several of its executives, including founder Jonathan Ross, but it did not purchase the company. Mergers typically require regulatory approval, which can be blocked. The current structure appears as two normal business decisions: a technology license followed by hiring.
"The Groq story is a prime example… benefiting consumers," stated an Nvidia spokesperson.
The Investigation’s Focus
The central question under investigation is whether the deal structure was intentionally designed to avoid scrutiny, despite appearing like separate transactions.
Enforcers might argue that the arrangement functioned as a merger, even if it wasn’t one on paper. To make their case, they would need to demonstrate that Groq’s position post-deal significantly hindered its ability to compete.
Similar Structures
Nvidia has employed a similar structure with Poolside, paying $6bn for a license and hiring 109 staff. The pattern raises questions about the intent behind these deals, especially when considered collectively.
Impact on Groq
Groq had emerged as a credible independent competitor in inference silicon, raising money at a $3.5bn valuation before the Nvidia deal. After the transaction, key personnel left, and Groq has since raised $650mn to rebuild its business around the remaining team and technology.
The Question Remains
Regulators face a challenging question: when does licensing technology and hiring employees amount to acquiring a competitor without an actual acquisition?
Congress had previously expressed concerns about the arrangement. Senators…