Nvidia has agreed to buy Hugging Face for $12.9 billion, The Information reported Wednesday night, citing people familiar with the matter. Business Insider, which first reported over the weekend that Hugging Face was acquiring the rights, reported Wednesday night that the negotiations, which would value the company at more than $13 billion, had not yet signed a letter of intent and could still be broken down into pieces.
TechCrunch previously reached out to both Nvidia and Hugging Face for comment, but neither has yet responded. (NVIDIA’s silence here is particularly notable, as the company has historically been quick to address reports it believes to be inaccurate.)
Maybe it was doomed from the beginning. Founded in 2016, Hugging Face is one of the most popular hubs for developers to share and download open source AI models. Acquiring NVIDIA would give us a strong foothold in the world of open source AI as open source developers do their best to keep up with closed AI systems from companies like Anthropic and OpenAI.
Why would Nvidia want that? The most obvious one would be to protect its dominance in AI chips, which, at least from the outside looking in, look increasingly at risk despite Nvidia’s aggressive chip release schedule. Nearly all of the largest closed-source AI labs (OpenAI, Google, Amazon, Anthropic) are currently building their own AI chips to reduce their dependence on Nvidia. A thriving ecosystem of open source AI models will give customers more alternatives to these closed labs, resulting in more of the market relying on Nvidia’s hardware. That’s why Nvidia has already spent tens of billions of dollars building its own open source AI models.
Should we be surprised that Hugging Face’s days as an independent group seem to be numbered? not much. Hugging Face CEO Clem DeLang has spent much of this year publicly aligning himself with Nvidia’s open source push, amid months of heated debate as Washington officials reportedly considered restricting the open weight model. (Chinese labs like Moonshot AI have released systems like its Kimi K3 model that are comparable to leading U.S. models in benchmarks but cost much less to operate. As a result, there has been talk of competition and national security concerns in Washington. Some critics of closed labs, such as White House adviser David Sachs, have suggested that those fears may be fueled by the “duopoly” of Anthropic and OpenAI.)
For example, during an appearance on CBS’s “Face the Nation” earlier this month, DeLang said that Hugging Face is using an NVIDIA-modified version of China’s open source model to defend itself after a cyberattack, and pointed to a recent letter (signed by NVIDIA CEO Jensen Huang and 24 other companies, including Hugging Face) urging the U.S. government to support rather than restrict the open model. In a separate interview with CNBC in late July, DeLange made a similar point, citing the same letter and warning that China has “clear control” over open source AI.
The deal could signal something of a resurgence for Nvidia in the cloud computing space. Nvidia reportedly scaled back its cloud business, called DGX Cloud, about a year ago. But owning Hugging Face, which already allows developers to run AI models using rented computing power, could pave the way for Nvidia to return to that market without starting from scratch, according to The Information.
Financial safety nets are also in place. Nvidia has committed to covering tens of billions of dollars in costs for customers’ cloud computing deals. If those customers end up not being able to use all the computing power they signed up for, Nvidia could be stuck with it. Owning Hugging Face will allow Nvidia to sell unused capacity to Hugging Face customers.
This price has increased significantly from Hugging Face’s last known value. The company raised $235 million in a funding round valued at $4.5 billion in 2023. The round was led by Salesforce Ventures, with additional funding from Alphabet’s GV, IBM Ventures, and Nvidia itself.
This isn’t the first brush that Hugging Face has received an offer from Nvidia either. Hug Face turned down a $500 million investment offer from Nvidia late last year that would have valued the company at $7 billion, the Financial Times previously reported. Hugging Face said at the time that it did not want a powerful investor who could sway its decisions.
Why say yes now? Some might argue that an acquisition is different from buying out one huge backer. This scenario often means a transfer of control under pressure to continue to grow.
Hugface is also still a relatively small company in terms of revenue in the AI world. The Information recently reported annual revenue of about $150 million, up from about $100 million just two months ago.
As DeLang told TechCrunch last month, this growth has brought the company “closer to profitability.” Still, the nearly $13 billion price tag is a huge multiple for a company of this size, and it’s hard to resist.
It won’t be the last, as suggested by Stripe’s recent deal to acquire OpenRouter, a startup founded in early 2023 that helps customers choose different AI models to perform different tasks depending on their needs and budget.This deal comes just as other AI infrastructure competitors are starting to gravitate toward other organizations, such as Hugging Face This would give them access to much more generous funds.
OpenRouter was valued at just $1.3 billion in its Series B round in May. Stripe reportedly paid more than $7 billion to go in-house earlier this month.
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