Nvidia Nears Acquisition of Hugging Face for $12.9 Billion

Recent reports suggest that chip industry giant Nvidia is on the verge of closing one of its most significant AI deals, by acquiring the renowned Hugging Face platform for around $12.9 billion. According to informed sources, the talks—which could value the company at more than $13 billion—have not yet been finalized with a signed agreement and could collapse at any moment. Nevertheless, Nvidia's silence regarding these reports is notable, especially since the company is accustomed to responding quickly to any information it deems inaccurate.

What Is Hugging Face and Why Does Nvidia Want It?

Founded in 2016, Hugging Face has become one of the most prominent platforms through which developers share and download open-source AI models. Owning this platform gives Nvidia a strong foothold in the open AI world, at a time when developers of these models are working hard to catch up with the closed systems offered by companies like OpenAI and Anthropic.

Protecting Dominance in the Chip Market

The most prominent motive behind this move lies in Nvidia's desire to protect its supremacy in the AI chip market—a supremacy that has appeared increasingly threatened despite the company's rapid pace of chip releases. Most major closed AI labs, such as OpenAI, Google, Amazon, and Anthropic, are now developing their own chips to reduce their dependence on Nvidia.

From here, the flourishing of the open-source model ecosystem gives customers more alternatives to closed labs, keeping a wider segment of the market tied to Nvidia's hardware. It is precisely for this reason that the company has already pumped tens of billions into building its own open models.

A Declared Alliance Preceding the Deal

The approaching end of Hugging Face's independence should not surprise us, as its CEO, Clément Delangue, spent a large part of this year publicly embracing Nvidia's orientation toward open source, amid escalating debate over the possibility of Washington imposing restrictions on open-weight models. This debate came after Chinese labs launched models that compete with their American counterparts in terms of performance at much lower operating costs, raising concerns related to competitiveness and national security.

In a television appearance, Delangue noted that his platform used a modified Nvidia version of a Chinese open-source model to defend itself after a cyberattack, citing a letter signed by Nvidia CEO Jensen Huang and 24 other companies urging the US government to support open models rather than restrict them.

A Return to Cloud Computing and a Financial Safety Net

The deal carries additional strategic dimensions, most notably:

• Return to the cloud: After Nvidia scaled back its "DGX Cloud" service about a year ago, owning Hugging Face—which helps developers run their models via rented computing power—allows it to return to this market without starting from scratch.
• Financial safety net: Nvidia has pledged to cover part of the costs of massive cloud computing deals for its customers. In the event these customers do not consume the full capacity, the company can sell the surplus to Hugging Face customers.

A Big Leap in Valuation

The circulated price represents a huge leap from the company's last known valuation. The company raised $235 million in 2023 at a valuation of $4.5 billion, with the participation of investors including Nvidia itself. This was not Nvidia's first offer, as Hugging Face previously rejected an investment offer of $500 million that would have valued it at seven billion, fearing the presence of a dominant investor who would influence its decisions.

The question remains: why accept now? It can be said that a full acquisition differs from accepting the backing of a single giant, a scenario that often means ceding control in exchange for ongoing growth pressures. Although Hugging Face's annual revenue is about $150 million—a relatively modest figure—a price of nearly $13 billion represents a huge multiple that is hard to refuse, especially with the company approaching profitability.

This deal comes at a time when AI infrastructure competitors are being swallowed up by larger companies, as happened with Stripe's recent acquisition of OpenRouter for more than seven billion dollars, reflecting an accelerating wave of consolidation in this sector.

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