Nvidia's $13B Hugging Face Deal: A Cloud Capacity Play
Nvidia's acquisition of Hugging Face for $12.9 billion has raised eyebrows among analysts, valuing the open-source AI model repository at around 80 times its annualised revenue of about $150 million.
However, Wedbush, a US investment bank, argues that this price is not as steep when considering Nvidia's size and scope in the industry.
The real question is why Nvidia wants to enter the software business, especially when it means competing with its own customers, the big cloud providers.
According to Wedbush, the answer lies in Nvidia's ambitions in the cloud, which has led it to pledge $36 billion to cloud contracts underpinned by credit-support arrangements. This deal would provide a captive source of demand for Nvidia's computing capacity, mitigating the risk of these operators failing to find buyers.