Nvidia’s A $20 billion deal to buy assets from AI chip design company Groq “milked” shareholders, a lawsuit filed by the startup’s former engineers alleges.
Joshua Rubin and Benjamin Celebrin argued in an Oct. 2 filing with the Delaware Court of Chancery that the deal offered shareholders a “subpar” price.
Rubin and Celebrin both left Groq before the Nvidia partnership was announced, according to their LinkedIn profiles, but the lawsuit says they still owned stock in the company.
Groq announced in December that it had signed a licensing agreement with Nvidia for its inference technology. Groq founder and CEO Jonathan Ross and company president Sunny Madra joined the $5 trillion semiconductor giant as part of the deal, along with other senior executives.
Groq said it would continue as an “independent company” and has raised about $1 billion since June from investors including Nvidia.
Mr. Rubin and Mr. Celebrin’s lawsuit alleges that Groq’s board of directors “sold the company to NVIDIA without a shareholder vote as required by Delaware law or any process to test or maximize the value of NVIDIA’s acquisition.”
“Our licensing agreement with NVIDIA has created exceptional value for Groq, our investors, and our employees,” a Groq spokesperson told CNBC.
“This lawsuit is without merit and we will vigorously defend against it,” they added. “We remain focused on serving our customers and building the world’s leading AI inference cloud.”
Nvidia has been contacted for comment.
$20 billion deal
The lawsuit alleges that NVIDIA “allocated $17 billion in licenses it labeled as ‘non-exclusive,’ set aside an additional $3 billion in NVIDIA restricted stock units (‘RSUs’) for Groq employees who moved with its technology, and positioned the investment funds that named members of the Groq board to reap the windfall profits of subsequent exploitation.”
It also claims that “as a result, a majority of the board of directors was in conflict.” “The board’s inconsistent choices have cost Groq shareholders billions of dollars in losses,” it added.
According to the lawsuit, approximately 150 to 200 Groq engineers became Nvidia employees as part of the deal.
In an email to employees at the time the deal was announced and obtained by CNBC, Nvidia CEO Jensen Huang said the deal expands Nvidia’s capabilities.
“We plan to integrate Groq’s low-latency processors into the NVIDIA AI Factory architecture and expand the platform to support an even wider range of AI inference and real-time workloads,” Huang wrote.
Huang added: “While we are adding talented employees to our ranks and licensing Groq’s intellectual property, we are not acquiring Groq as a company.”
