Nvidia Faces Lawsuit Over $20 Billion Groq Deal

Nvidia Corp. (NVDA) is facing a legal challenge over its $20 billion asset agreement with AI chip designer Groq, after two former engineers alleged that stockholders were squeezed out at an unfairly low price. Joshua Rubin and Benjamin Serebrin filed the complaint on Oct. 2 in Delaware's Court of Chancery, claiming that the deal structure unfairly allocated value between technology licenses, employee compensation, and common stockholders.

The dispute stems from a December licensing agreement that granted Nvidia access to Groq's inference technology. The lawsuit alleges that Nvidia assigned $17 billion to a non-exclusive license and another $3 billion in restricted stock units for Groq employees who moved to Nvidia. The plaintiffs argue that Groq's directors sold the company without a stockholder vote or a process to maximize value.

Groq has rejected the allegations, stating that the licensing agreement delivered exceptional value for the company, its investors, and employees. The company maintains it will continue operating independently and has raised approximately $1 billion since June from investors, including Nvidia. Nvidia's CEO, Jensen Huang, emphasized in an internal email that the deal was not a full acquisition but a licensing arrangement to expand the company's capabilities.

The lawsuit arrives as Nvidia's dominance in AI computing remains largely unchallenged, with Wall Street analysts maintaining a Strong Buy consensus rating on the stock. The legal action could complicate Nvidia's strategy of expanding into broader AI infrastructure and may influence how other AI startups negotiate licensing agreements with larger technology companies.