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AI chipmaking startup Groq — not to be confused with Elon Musk’s AI chatbot, spelled Grok — announced Monday that it’s secured another $640 million from BlackRock, Cisco, and other investors.
The funding brings the value of the budding Nvidia competitor to $2.8 billion. The firm makes slightly different kinds of AI hardware than Nvidia, manufacturing LPUs, or language processing units, where Nvidia makes GPUs, or graphics processing units. Which chip is superior is still up for debate. LPUs have helped established AI models process data faster, but GPUs are still the most efficient at training new, untrained AI models. The latest funding will help Groq meet its goal to deploy 108,000 LPUs by the end of the first quarter of 2025.
Groq has another advantage in taking on Meta’s AI chief Yann LeCun as an adviser. Meta has a vested interest in bolstering Nvidia’s competition to diversify the AI chip market, and potentially bring down astronomically-high prices. Nvidia currently controls between 70% and 95% of the AI chip space and has a near-80% gross margin. More competition and cheaper chip prices could reduce tech giants’ hefty AI costs, which have recently come under scrutiny from investors worried about how long it will take for those costs to pay off.
Nvidia’s Blackwell chips will cost between $30,000 and $40,000, while Groq’s LPUs cost $20,000. Meta is also developing its own custom AI chips, as are its competitors, including Google, Microsoft, and Amazon. Still, those custom chips are more-so focused on running those companies’ specific software than producing hardware at scale.
Groq’s boost comes just as Nvidia faces setbacks. The company is reportedly facing production delays due to design flaws of its latest Blackwell AI chip series. The news sent the AI chip giant’s stock tumbling on Monday morning. Nvidia shares have fallen 10% over the last week.