Groq raises $350M to fuel its pivot from AI chips to neocloud

Groq has raised $350 million as it shifts its business away from making its own AI chips and toward operating cloud services powered by Nvidia hardware. The funding round was led by investment firm Disruptive, with Nvidia planning to participate, and values the company at $3.5 billion. That valuation is lower than the $6.9 billion Groq was worth last September, before Nvidia hired its founder and CEO, Jonathan Ross, and other top talent as part of a $20 billion licensing deal paid to investors. A Groq spokesperson said the company does not view the lower figure as a down round but as a fresh valuation for the post-deal version of the business. The new capital follows a $650 million raise in June that kicked off the pivot.

Groq previously developed its own chips, called LPUs, or language processing units, to compete with Nvidia on inference, which is the computing power needed to run AI models in real time. After losing its star team to Nvidia, the company changed course from being a pure chipmaker to a provider of cloud and data center services that operate Nvidia systems. Groq now runs 13 data centers across North America, Europe, the Middle East, and Asia Pacific, serving more than 6 million developers, enterprises, and AI-native companies. The company says the fresh funds will support customers seeking access to medium and larger clusters of Nvidia accelerated computing for training and inference.

Groq intends to scale its capacity from 54 megawatts to more than 200 megawatts by 2027. Alex Davis, Groq’s chairman and the CEO of Disruptive, said the company is building itself into the world’s leading AI inference cloud. He added that inference will become the largest and most critical layer of AI infrastructure. The statement reflects a broader push among so-called neoclouds, which rent out Nvidia GPUs and related infrastructure to other businesses.

The pivot places Groq squarely inside Nvidia’s ecosystem, a position it shares with other neoclouds such as CoreWeave, Lambda, and Nebius. Nvidia supplies the GPUs that power those clouds and has also invested billions into some of those companies as they race to expand capacity. CoreWeave recently reported strong second-quarter revenue growth and landed major contracts with Meta and Anthropic. However, investors have raised concerns about that company’s high capital expenditures, heavy reliance on debt, exposure to rapidly depreciating hardware, and its ability to turn growth into free cash flow.

It remains an open question whether neoclouds can be profitable enough in the long term to justify their substantial investments. Groq’s financials are still private, so its profitability is not yet known. The company’s future now depends on competing within Nvidia’s infrastructure market, where demand for inference is high as enterprises scale their AI workloads. Groq’s lowered valuation reflects the changing shape of the company after the loss of its founding team and its transition into a service provider.