Chipmakers Hedge Against Uncertainty with Billions Spent on AI Acquisitions

Nvidia and AMD have made significant investments in the AI industry by acquiring two companies that specialize in different layers of AI development. Nvidia bought Hugging Face, an open-model platform, for approximately $12.9 billion, while AMD acquired World Labs, a spatial intelligence startup, for about $8.2 billion in stock.

The deals highlight the uncertainty in the AI industry about which layer will capture the most value. The two largest chip companies in AI have spent billions on companies that make no chips at all, indicating they are unsure where the money will end up. Nvidia's own record on world models illustrates this, as it has built its own Cosmos world foundation models and still invested in World Labs.

AMD's acquisition of World Labs is significant, given the company's smaller size compared to Nvidia. The deal includes a 70-person team that builds world models, which generate and simulate interactive 3D environments for uses such as robotics training and simulation. Fei-Fei Li will join AMD as executive vice president and chief scientist, reporting directly to Lisa Su.

The payment method makes the price manageable for AMD, with shares issued in a private placement based on its 10-day volume-weighted average share price. The deal costs AMD less than 1% of its equity value and none of its cash.