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Groq Deal

Groq recently announced that it entered into a non-exclusive licensing agreement with Nvidia (NVDA) for Groq's inference technology.

"The agreement reflects a shared focus on expanding access to high-performance, low cost inference. As part of this agreement, Jonathan Ross, Groq's Founder, Sunny Madra, Groq's President, and other members of the Groq team will join Nvidia to help advance and scale the licensed technology. Groq will continue to operate as an independent company with Simon Edwards stepping into the role of Chief Executive Officer. GroqCloud will continue to operate without interruption," the company stated.

Leadership in AI 

Cantor Fitzgerald noted that on Christmas Eve, Nvidia announced the acquisition of Groq IP and talent for $20 billion. At a high level, the firm views this acquisition as offering both offense and defense. On the offense side, Cantor knows Nvidia has been working with Groq for specific inference acceleration. The firm suspects Nvidia saw real opportunities and decided it would be better for Groq to be inside Nvidia vs. external partners.

As for defense, while Cantor knows Nvidia dominates AI training and time-based inference, with Groq's low-latency and energy-efficient inference, this offering inside Nvidia's full system stack solution will enable even greater share of the inference market, particularly for the next leg of the AI infrastructure build out.

Put together, Cantor thinks this acquisition only enhances Nvidia's full system stack and overall leadership in the AI market. Nvidia remains a Top Pick for Cantor, which reiterated a price target of $300 on the shares.

Interesting Strategic Move

Wells Fargo analyst Aaron Rakers also noted the agreement with Groq. While details are sparse, the firm sees this as highlighting the push to drive next-generation AI inference optimized compute. Overall, Wells believes this is a very interesting strategic move by Nvidia from which it thinks investors will be focused on. The firm maintained an Overweight rating on Nvidia and a price target of $265 on the shares.

Tech and Talent Grab 

Bernstein similarly noted the deal. Actual terms have not been disclosed as of this writing, but this seems to be more a grab for technology and human capital by Nvidia than a straight purchase, the firm argued.

Overall, Bernstein believes the move appears strategic in nature for Nvidia as they leverage their increasingly powerful balance sheet to maintain dominance in key areas. The firm maintained an Outperform rating on the shares with a price target of $275.

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