Justice Department Investigating Nvidia's Groq Deal for Antitrust Evasion, NYT Reports

The U.S. Justice Department is investigating whether Nvidia's deal with artificial intelligence chipmaker Groq was structured to avoid antitrust scrutiny, The New York Times reported, citing two people familiar with the matter. The inquiry reportedly began soon after the agreement was announced in December and has since escalated to a formal demand for information from Nvidia.

Scrutiny on Unconventional Deal

The investigation centers on an arrangement that combines a technology licensing agreement with the hiring of key executives. As part of the deal, Nvidia gained access to Groq's custom chips for AI inference, while Groq's Chief Executive Jonathan Ross and Chief Operating Officer Sunny Madra joined Nvidia.

This structure has drawn regulatory attention because it may fall outside the scope of automatic government reviews required for traditional mergers and acquisitions. Such deals can still allow larger companies to acquire critical talent and intellectual property from smaller rivals, raising competitive concerns.

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Market Context and Potential Outcomes

The probe highlights the increasing regulatory focus on the AI sector and Nvidia's dominant position. With a market capitalization of approximately $5.4 trillion, Nvidia has been actively investing in AI startups and customers, leveraging its financial strength to expand its influence.

Despite the arrangement, Groq remains an independent company. It announced in August it was raising $350 million in new funding, with Nvidia reportedly planning to participate. Groq was last valued at $7 billion prior to the deal, according to PitchBook. While the Justice Department could fine Nvidia if it finds wrongdoing, officials do not currently expect the deal to be unwound, and the inquiry could conclude without any enforcement action, the report noted.