"The big news today concerns Nvidia ( Nasdaq: NVDA), which is making what CNBC calls "its largest purchase ever," spending $20 billion to acquire the assets of an artificial intelligence semiconductor chip manufacturer called "Groq." (Note: No, not Elon Musk's Grok AI service. That's a different company.) CNBC says Groq was most recently valued at $6.9 billion on the private market in September, so the price Nvidia is paying represents roughly a 3x increase in the company's value in three months."
"Groq is said to be targeting $500 million in revenue this year. Assuming it gets there, the valuation on this deal would be 40 times current year sales. For comparison, Nvidia's own stock costs less than 25x trailing sales today. So yes, Nvidia is buying Groq at a premium. Then again, with a stock market valuation of $4.6 trillion, if anyone can afford to buy things at a premium, it's Nvidia."
Markets were quiet after Christmas with the Vanguard S&P 500 ETF trading essentially flat premarket and positioned to finish the week up about 1.4% after earlier gains. Nvidia is spending $20 billion to acquire the assets of AI chip maker Groq, a price roughly three times Groq's private valuation of $6.9 billion from September. Groq describes the transaction as a non-exclusive licensing agreement for its inference technology while remaining independent, though some commentators say Nvidia is acquiring all assets. Groq targets $500 million in revenue this year, making the deal roughly 40 times current-year sales, a clear premium to Nvidia's own valuation metrics.
Read at 24/7 Wall St.
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