Startups & Funding
Groq raises $650 million to pivot toward neocloud model
Groq raised $650 million to pivot toward a neocloud business model following a licensing deal with Nvidia that saw the departure of its founder and key executives.
On Monday, Groq announced a new $650 million funding round led by Disruptive and Infinitum. The raise comes roughly six months after a $20 billion licensing deal in December with Nvidia—a transaction structured as a “not-acqui-hire,” which is a deal where a rival pays investors a fee while poaching talent. Under that agreement, Nvidia signed a non-exclusive licensing agreement for Groq’s technology and hired away key executives, including founder and former CEO Jonathan Ross and former president Sunny Madra.
Following the Nvidia deal, Groq’s strategy appears to be raising money, hiring talent, and pivoting. The company is shifting toward its neocloud business—Groq’s pivoted business model—which was previously run by Madra after Groq acquired his AI data analytics company, Definitive Intelligence, in 2024. This neocloud business has 13 data centers across North America, Europe, the Middle East, and APAC. It serves over five million developers and processes trillions of tokens weekly.
To support this pivot, Groq has refreshed its leadership under CEO Doug Wightman, a former Google engineer who co-founded Groq about a decade ago with Ross—who also came from Google—and stayed on after the Nvidia deal. The company hired Alan Rice, formerly of xAI and Meta, as COO. It also hired Sinclair Schuller as CTO and Rakesh Malhotra as CPO. Schuller and Malhotra previously worked together at enterprise cloud software company Apprenda, and later co-founded software-engineering firm Nuvalence, which was acquired by EY in 2024. Malhotra also spent about a decade working on cloud products at Microsoft.
Groq originally created a chip called a language processing unit (LPU) for inference—the process of running AI models. However, with Nvidia now owning the non-exclusive license to the LPU technology, Nvidia announced its own hardware system using the technology in March. Investors in Groq’s previous funding round—which raised $750 million in September at a $6.9 billion valuation—were said to have profited handsomely from the Nvidia deal. Whether Groq can succeed in its new direction depends on how competitive its inference cloud can remain now that its hardware technology is shared with Nvidia. Other companies have navigated similar transitions. Scale AI, led by CEO Jason Droege, reportedly rebounded after Meta completed a $14.3 billion not-acqui-hire deal about a year ago, and is on track to reach $1 billion in revenue.
Why it matters
Groq’s pivot illustrates how AI infrastructure companies are navigating “not-acqui-hire” deals, where rivals secure IP and talent while leaving the original entity to reinvent its business model.