Nvidia’s $20 billion Groq deal is facing a legal challenge. Two former Groq engineers who owned shares in the AI chip startup have sued the company’s board, alleging that the transaction gave Nvidia Groq’s technology and most of its engineers while leaving other shareholders with a poor deal. The lawsuit, filed in a Delaware corporate law court, claims Groq’s board improperly structured the 2025 transaction as a licensing agreement instead of a full acquisition.Nvidia had described the arrangement as a “non-exclusive” licensing deal that allowed Groq to remain an independent company. The plaintiffs, however, allege that Nvidia also hired nearly all of Groq’s engineers, effectively taking key parts of the company, while shareholders left behind did not receive the same benefits.
Lawsuit challenges Nvidia’s $20 billion Groq deal
Benjamin Serebrin and Joshua Rubin, two former Groq engineers who held shares in the startup, filed the complaint. They allege that Groq’s board was affected by conflicts of interest and failed to secure the best possible price and structure for shareholders.The lawyers representing the two engineers said the transaction “grabbed ‘Groq’s valuable technology and the engineers who built Groq, took billions of dollars in benefits for itself, senior management, and affiliated funds that it did not share with Groq’s other stockholders.”Nvidia declined to comment. Groq said the licensing agreement “delivered exceptional value for Groq,” its investors, and its employees.“This lawsuit is meritless and we will vigorously defend ourselves against it. We remain focused on serving our customers and building the world’s leading AI inference cloud,” Groq said.
Nvidia paid $17 billion for Groq technology
The $20 billion transaction included a $17 billion licensing agreement, with the proceeds shared among Groq’s backers. Nvidia also created a separate $3 billion stock bonus pool for certain Groq engineers who joined the company. Groq founder and board member Jonathan Ross was among those who moved to Nvidia.Groq developed a specialised AI chip known as a language processing unit, or LPU. The company claimed that its technology could run some AI models faster and more efficiently than Nvidia’s graphics processing units.According to the lawsuit, common shareholders were bought out at a low price, while Ross and other senior employees received separate compensation for moving to Nvidia with the technology.
Nvidia reportedly hired nearly all Groq engineers
The two companies announced on Christmas Eve last year that Ross and other senior executives would join Nvidia, while Nvidia would license Groq’s technology. The lawsuit claims the arrangement also involved Nvidia hiring “nearly all” of Groq’s engineers, estimated at as many as 200 employees.The plaintiffs argue that this effectively transferred Groq’s core technology and workforce to Nvidia while leaving the remaining company as a significantly smaller business.The transaction has also drawn scrutiny over the growing use of so-called “acqui-hires”, where large technology companies bring in a startup’s employees without acquiring the entire company.Senators Elizabeth Warren, Richard Blumenthal and Ron Wyden said earlier this year that “‘acqui-hires’ appear to be designed to evade antitrust scrutiny and risk further consolidating the Big Tech industry”.
Groq was later valued at $3.5 billion
The lawsuit also challenges the eventual payout to shareholders, arguing that it did not account for the future value of Groq’s technology or potential synergies with Nvidia.The plaintiffs also claim that the $17 billion licensing payment was treated as taxable income for Groq, further reducing the value available to shareholders.Nvidia later participated in a funding round that valued the remaining Groq at $3.5 billion. The startup subsequently shifted its focus to AI cloud computing and dropped its chip design efforts.The plaintiffs allege that four funds on Groq’s board, BlackRock, Social Capital, Infinitum and Disruptive, had conflicts of interest because they remained affiliated with the surviving company. The funds themselves are not defendants in the lawsuit.The plaintiffs acknowledged that no direct Delaware legal precedent addresses whether acqui-hires should be treated like traditional mergers and acquisitions.“No Delaware decision has directly answered the question this case raises,” they wrote.Nvidia announced its first new chip based on Groq’s technology in March, with the chip going into full production in August. The deal has also reportedly come under scrutiny from US regulators, who are examining whether such deals can evade traditional merger review.