The Deal That Wasn't a Deal

On December 24th, 2025 as most of America was wrapped up in holiday festivities, NVIDIA quietly executed one of the most audacious anticompetitive maneuvers in recent tech history. The company announced what it euphemistically called a "non-exclusive licensing agreement" with Groq, the AI inference startup that had spent the better part of 2025 openly positioning itself as the "NVIDIA-killer."

Let's be clear about what actually happened: NVIDIA paid approximately $20 billion to gut its most promising competitor. They took the founder. They took the president. They took the senior engineering team. They licensed the core intellectual property. What's left is a hollowed-out shell called "Groq" that will "continue to operate independently" under the CFO-turned-CEO Simon Edwards, running a cloud service with technology its creator just handed to the competition.

Calling this a "non-exclusive licensing agreement" is like calling a corporate takeover a "strategic partnership." The structure is a legal fiction designed for one purpose: evading the antitrust scrutiny that would have accompanied a traditional acquisition. As Bernstein analyst Stacy Rasgon noted with unusual bluntness, the deal "may keep the fiction of competition alive" even as Groq's leadership and technical talent migrate wholesale to NVIDIA.

The LPU: What NVIDIA Couldn't Build, So They Bought

To understand why this matters, you have to understand what Groq actually built. The Language Processing Unit (LPU) represents a fundamentally different approach to AI inference which is one that NVIDIA's GPU-centric architecture simply cannot replicate.

Where GPUs rely on high-bandwidth memory (HBM) that introduces hundreds of nanoseconds of latency per weight fetch, Groq's LPU integrates hundreds of megabytes of SRAM directly on-chip, achieving memory bandwidth of 80 terabytes per second which is roughly 10x what GPU off-chip memory can deliver. The result? Groq consistently outperformed NVIDIA's flagship Blackwell chips in tokens-per-second benchmarks throughout 2025.

In the rapidly expanding inference market, which surpassed training revenue for the first time in 2025, Groq represented the first credible silicon-level challenge to NVIDIA's dominance. The company was running AI models at speeds NVIDIA couldn't match, at lower power consumption, with a completely different computational paradigm.

So NVIDIA did what monopolies do: they eliminated the threat.

The Two-and-a-Half Player Market

Look at the landscape of viable AI accelerator vendors in December 2025:

NVIDIA commands somewhere between 70% and 92% of the AI chip market, depending on how you measure it. They own training. They're now positioning to own inference. With Groq's LPU technology slated for integration into the 2026 "Vera Rubin" architecture, they'll have the best of both worlds: massive parallel processing power for training and deterministic low-latency inference for deployment.

AMD is the perpetual also-ran. The Instinct MI325X showed promise, but AMD's market share in AI accelerators hovers around 8-10%. With NVIDIA now controlling the world's fastest inference IP, AMD faces an even steeper climb to relevance. Their CUDA alternative (ROCm) has never achieved critical mass, and now they're competing against a company that just absorbed the one architecture that genuinely outperformed GPUs in real-world inference workloads.

Intel is barely worth mentioning. Still mired in a multi-year turnaround, Intel's AI accelerator efforts are a rounding error in market share terms. The Gaudi chips have found some adoption, but Intel is years behind and falling further back.

The hyperscalers better known as Google's TPUs, Amazon's Trainium, Meta's MTIA represent the only remaining counterweight to NVIDIA's dominance. But these chips are captive to their parent companies. You can't buy a TPU (as an individual). You can rent one from Google Cloud.

The Myth of "Continued Operation"

NVIDIA's carefully worded press release emphasizes that "Groq will continue to operate as an independent company" and that "GroqCloud will continue to operate without interruption." This is technically true in the same way that a decapitated chicken continues to run around the yard.

What exactly does Groq retain?

  • A cloud service running on technology now licensed to its largest competitor
  • A CFO promoted to CEO with no apparent technical leadership
  • A "non-exclusive" license, meaning NVIDIA can freely deploy Groq's innovations while Groq... also deploys them, but without the resources, scale, or integration advantages NVIDIA commands
  • A valuation that tripled in three months from $6.9 billion to $20 billion—suggesting investors were primarily pricing in the exit, not continued operations

The engineering brain trust, the people who actually built the LPU are walking into NVIDIA's headquarters. The 74 patents underlying Groq's technology are now licensed to a company with unlimited resources to exploit them. The "continued operation" is marketing cover, not business reality.

Regulatory Arbitrage as Business Strategy

The beauty of this deal structure is that it probably survives regulatory scrutiny. A straight acquisition of a $7 billion competitor by a company controlling 80-90% of the market would have triggered immediate review. The FTC killed NVIDIA's ARM acquisition in 2022 for exactly these reasons.

But a "licensing agreement" with "voluntary" executive departures? That's harder to challenge. NVIDIA isn't technically acquiring Groq. They're just... hiring its leadership, licensing its technology, and paying $20 billion for the privilege. Groq remains a separate company. Competition remains theoretically possible.

This is the same playbook Big Tech has deployed throughout 2024 and 2025. Microsoft didn't acquire Inflection AI; they hired most of the team and licensed the technology. Meta's Scale AI investment followed similar patterns. Google acqui-hired Character AI's founders while the company nominally continued to exist. The regulatory arbitrage is now standard operating procedure: if you can't buy the company outright, hollow it out through "partnerships" and talent acquisition.

The DOJ's ongoing antitrust investigation into NVIDIA focuses on tying arrangements and Mellanox-related conduct. But the agency seems unprepared for this new form of competition-killing-by-licensing-agreement. By the time regulators understand what happened, NVIDIA will have integrated Groq's technology into production silicon.

The Inference Market Nobody Else Can Win

The timing of this deal is particularly damaging because inference, not training. is where the AI chip market is actually heading. Training a large language model is a one-time (or periodic) event. Running inference on that model is continuous, at scale, for every user interaction. The economics favor whoever owns inference.

Groq understood this. Their LPU was purpose-built for exactly this market. Their architecture delivered the lowest latency in the industry. Companies like McLaren F1 were already choosing Groq specifically because GPUs couldn't match their real-time performance requirements.

NVIDIA understood this too. Jensen Huang spent much of 2025 arguing that NVIDIA would maintain its lead as AI markets shifted from training to inference. The Groq acquisition is the insurance policy. Rather than compete on architectural merits, NVIDIA simply absorbed the one company that had built something better.

Now the inference market looks like this: NVIDIA with integrated GPU+LPU technology, AMD struggling with ROCm adoption, Intel irrelevant, and hyperscaler chips locked behind cloud services. Where exactly is a company supposed to buy competitive inference silicon?

The Broader Consolidation Pattern

Zoom out and the pattern is unmistakable. The AI accelerator market is consolidating into a structure that offers no meaningful competition:

2019: NVIDIA acquires Mellanox for $7 billion, gaining control of the high-speed networking stack essential for AI data centers.

2024: NVIDIA attempts to acquire ARM, which would have given them control of the CPU architecture underlying most mobile and embedded AI. The FTC blocks it—one of the few successful interventions.

September 2025: NVIDIA acqui-hires Enfabrica for $900 million, absorbing another startup working on AI networking hardware.

December 2025: NVIDIA effectively acquires Groq for $20 billion, eliminating the most credible threat to their inference dominance.

Each deal expands NVIDIA's control over the AI compute stack. Each deal is structured to minimize regulatory friction. The result is a company that now controls not just AI training chips, but inference chips, networking infrastructure, and the software ecosystem (CUDA) that locks developers into their hardware.

What Competition Looks Like Without Groq

Imagine you're a startup trying to build the next generation of AI applications. You need inference capability. Your options are:

  1. Buy NVIDIA GPUs at whatever price NVIDIA sets, with whatever allocation NVIDIA decides you deserve
  2. Rent Google TPUs through Google Cloud, enriching a company that competes with you in AI
  3. Use Amazon Trainium through AWS, enriching a company that competes with you in... everything
  4. Try AMD and deal with software compatibility issues, smaller model support, and the knowledge that NVIDIA just absorbed the one company that had genuinely superior inference performance
  5. Wait for Cerebras to go public and hope they don't get the same treatment Groq just received

This is slowly turning from a competitive market into a tollbooth economy where a handful of gatekeepers extract rent from everyone trying to build AI applications.

The "But They'll Compete On Innovation" Argument

NVIDIA defenders will argue that the company's dominance reflects genuine innovation, not anticompetitive behavior. They'll point to the continuous improvement from A100 to H100 to H200 to Blackwell. They'll note that NVIDIA's CUDA ecosystem provides real value to developers.

These arguments miss the point. NVIDIA's dominance may have originated in superior products, but it is now maintained through ecosystem lock-in and strategic elimination of competitors. The CUDA moat is real, but it exists because NVIDIA invested billions in making it prohibitively expensive to switch—not because alternatives couldn't exist.

Groq proved alternatives could exist. The LPU demonstrated that purpose-built inference silicon could outperform GPUs on the metrics that actually matter for production AI. The technology was real. The performance advantages were documented. The market validation was happening.

And then NVIDIA wrote a $20 billion check to make sure that technology would never compete against them.

The China Dimension

There's a geopolitical angle here that deserves attention. Throughout 2025, NVIDIA has navigated an increasingly complex relationship with China. The US restricted H20 chip exports, then allowed them, then imposed conditions. NVIDIA paid export taxes to maintain Chinese market access. Meanwhile, domestic Chinese chip efforts like Huawei's Ascend processors and others have continued developing.

NVIDIA's absorption of Groq's technology strengthens their position on multiple fronts. It eliminates a potential competitor that could have partnered with Chinese firms or licensed technology outside NVIDIA's control. It consolidates Western AI compute capability in a single company that the US government can more easily monitor and regulate. And it ensures that the most advanced inference technology remains under American corporate (if not governmental) control.

Whether this is good or bad depends on your view of technology nationalism. But it's undeniably a consequence of allowing a single company to dominate AI infrastructure.

What Regulators Should Have Done (And Still Could)

The DOJ and FTC have shown they understand NVIDIA poses antitrust risks. The ARM deal was blocked. Investigations into tying practices are ongoing. European regulators have raided NVIDIA offices. France concluded the company is "likely abusing its dominance."

But the regulatory apparatus is structured to fight the last war. Agencies are set up to review announced acquisitions, not to prevent competition-killing-by-licensing-agreement. By the time anyone realizes what happened with Groq, the integration will be complete and the damage irreversible.

Here's what meaningful intervention would look like:

  1. Treat substantial talent acquisition as a merger when it effectively transfers competitive capability from one company to another
  2. Require behavioral remedies that prevent NVIDIA from integrating Groq's technology into proprietary products for a defined period
  3. Mandate CUDA interoperability so developers can actually use alternative hardware without rewriting their software stacks
  4. Block future acqui-hires in the AI accelerator space while the market remains this concentrated

None of this will happen under the incoming administration, which has shown zero appetite for tech antitrust enforcement. The window for intervention has likely closed.

The Future NVIDIA Just Bought

Jensen Huang's Christmas present to himself was the elimination of his most dangerous competitor. When the Vera Rubin architecture ships in 2026 with integrated GPU and LPU-derived inference capability, NVIDIA will offer a product that no competitor can match. The "super-chip" that analysts are predicting could "render current competition obsolete for years to come."

This is the future the Groq deal bought: a market where innovation happens inside NVIDIA, licensed by NVIDIA, and deployed on NVIDIA's terms. The barrier to entry for new hardware players becomes "almost insurmountable." The AI chip market consolidates into a "more monolithic and less diverse semiconductor landscape."

Maybe this is efficient. Maybe having one company control the AI compute stack reduces fragmentation and accelerates development. Maybe the alternative: a messy competition among dozens of startups would have actually slowed progress.

But let's not pretend this is what competition looks like. Let's not pretend Groq will meaningfully compete as an "independent company" after its founder, president, and senior engineers leave for NVIDIA. Let's not pretend the "non-exclusive license" provides any comfort when NVIDIA can outspend, out-manufacture, and out-distribute anything Groq might build.

What happened on December 24th, 2025 was a monopolist neutralizing an existential threat while regulators were home for the holidays. The structure was clever. The timing was cynical. The outcome was predetermined the moment Jonathan Ross and Sunny Madra agreed to join NVIDIA.