Former Groq shareholders challenge $20 billion Nvidia licensing deal

Two former Groq shareholders are challenging the AI chip company’s $20 billion licensing-and-hiring arrangement with Nvidia in a proposed class action in Delaware Chancery Court. They allege Groq’s former board and chief executive breached their fiduciary duties by approving the deal. Nvidia is not named as a defendant.

The complaint was filed under seal on September 29 and unsealed on October 5, according to reporting on the case. The former shareholders say side agreements and financial benefits influenced Groq leaders’ approval of a structure that transferred most of the company’s assets and staff to Nvidia, costing stockholders billions of dollars. Those claims remain allegations, and the available sources do not show that the court has ruled on their merits.

The transaction combined a non-exclusive license for Groq’s inference technology with the departure of founder Jonathan Ross, president Sunny Madra and other team members to Nvidia. In its December 24 announcement, Groq said it would remain independent under chief executive Simon Edwards and keep operating GroqCloud. The announcement did not disclose a price; the $20 billion figure comes from reporting on the case and a congressional letter.

The arrangement has also drawn scrutiny from U.S. lawmakers. In a February 4 letter to the Justice Department and Federal Trade Commission, Senators Elizabeth Warren, Richard Blumenthal and Ron Wyden cited the Groq transaction while calling for scrutiny of so-called reverse acqui-hires. These deals combine technology licensing with the hiring of key employees while leaving the original company legally independent instead of purchasing it outright.

Groq called the lawsuit meritless and said it would vigorously defend itself. The company also said the transaction delivered exceptional value for Groq, its investors and its employees.