AI Chip Startup Groq Raises $640M to Challenge Nvidia

Groq, a startup focused on developing chips to accelerate generative AI models, announced on Monday that it has raised $640 million in a new funding round led by BlackRock. Other participants included Neuberger Berman, Type One Ventures, Cisco, KDDI, and Samsung Catalyst Fund.

Significant Valuation Increase

This latest funding brings Groq’s total capital raised to over $1 billion and values the company at $2.8 billion. Initially, Groq sought to raise $300 million at a $2.5 billion valuation. This new valuation more than doubles its previous value of approximately $1 billion from April 2021, when it raised $300 million led by Tiger Global Management and D1 Capital Partners.

Key Appointments

Meta’s chief AI scientist Yann LeCun will join Groq as a technical advisor, and Stuart Pann, former head of Intel’s foundry business and ex-CIO at HP, will become the startup’s chief operating officer. LeCun’s involvement is notable given Meta’s investments in its own AI chips, adding a powerful ally for Groq.

Innovative Technology

Founded in 2016, Groq is developing a Language Processing Unit (LPU) inference engine. The company claims its LPUs can run existing generative AI models, like OpenAI’s ChatGPT and GPT-4, at 10 times the speed and one-tenth the energy consumption of conventional processors.

Background and Expertise

Groq CEO Jonathan Ross, co-inventor of Google’s tensor processing unit (TPU), co-founded the company with Douglas Wightman, a former engineer at Alphabet’s X moonshot lab. Groq provides an LPU-powered developer platform called GroqCloud, offering models like Meta’s Llama 3.1, Google’s Gemma, OpenAI’s Whisper, and Mistral’s Mixtral, as well as an API for cloud instances.

Market Presence and Expansion

As of July, GroqCloud had over 356,000 developers, with 75% of the Fortune 100 represented among them. Groq plans to use a portion of the new funding to scale capacity and add new models and features.

Competitive Landscape

Groq faces competition from AI chip upstarts and industry giant Nvidia, which controls 70% to 95% of the AI chip market. Nvidia plans to release a new AI chip architecture annually and is establishing a business unit for custom chip designs.

Industry Rivals

Groq also competes with Amazon, Google, and Microsoft, all of which offer custom AI chips. Amazon has its Trainium, Inferentia, and Graviton processors; Google provides TPUs and the upcoming Axion chip; and Microsoft has launched preview instances for its Cobalt 100 CPU and Maia 100 AI Accelerator.

Strategic Investments and Partnerships

Groq is investing heavily in enterprise and government outreach. It acquired Definitive Intelligence to form Groq Systems, serving U.S. government agencies and sovereign nations. Groq partnered with Carahsoft to sell its solutions to public sector clients and plans to install LPUs in Earth Wind & Power’s Norway data center and future data centers in the Middle East with Aramco Digital.

Future Plans

Groq is developing the next generation of its chip, contracting with Samsung’s foundry business to manufacture 4nm LPUs expected to outperform its first-gen 13nm chips. The company aims to deploy over 108,000 LPUs by the end of Q1 2025.