Sept 3 (Reuters) – Nvidia will buy popular developer platform Hugging Face for $12.93 billion, betting that support for open AI models will drive future demand even as its biggest customers develop their own chips to reduce reliance on the semiconductor giant.
Shares of the company were up 1.5% after the deal was announced on Thursday, which ranks among its biggest.
The deal will cement Nvidia as a central player in the market for open models that users can freely download, run and customize, unlike the closed systems built by OpenAI and Anthropic.
Nvidia has already played an active role in backing the open AI industry with its widely used Nemotron model.
Acquiring Hugging Face will give it direct access to a platform developers use to collaborate, test and share tools using various open AI models, potentially providing valuable insight and data to help it narrow the technology gap with top U.S. and Chinese labs.
Demand for open-weight models has surged from businesses balking at the steep bill of deploying the technology, with Chinese companies such as DeepSeek and Z.ai emerging as crucial players with models that can match the best from the U.S. in tasks, including generating computer code at a lower cost.
That surge has fueled fears that some American firms could become reliant on Beijing’s models as both countries race to dominate a technology they see as crucial to their future.
“Hugging Face will remain an open platform for the entire AI ecosystem,” Nvidia CEO Jensen Huang said, adding that his company’s chips would not be required to build on or deploy through Hugging Face.
Under the deal, Nvidia will pay about $11.9 billion to Hugging Face investors, while offering an equity-based retention program of up to $1 billion for employees who join Nvidia.
The two companies already work together to help developers use Nvidia’s computing services on the platform.
BALANCE SHEET STRENGTH
Hugging Face was valued at $4.5 billion in its last disclosed funding round in August 2023, when it raised $235 million from investors such as Salesforce, AMD and Amazon.
Nvidia, meanwhile, exited its July quarter with $22.44 billion in cash and cash equivalents, more than double January’s $10.61 billion, giving the chipmaker substantial capacity to fund the deal.
That financial strength reflects a rapidly expanding business. Late last month, Nvidia issued a rare year-ahead outlook, forecasting revenue growth of about 70% in fiscal 2028 as the AI infrastructure boom rages on.
But the chipmaker’s use of its balance sheet has also drawn scrutiny. Deals such as its agreement to guarantee up to $105 billion for OpenAI’s Ohio data-center lease have intensified investor concerns that Nvidia is supporting the demand driving its growth.
For Nvidia, building up open source may help it cushion a demand slowdown from customers such as Meta, OpenAI and Microsoft, which are developing their own AI chips to cut reliance on its costly and supply-constrained processors.
Hugging Face has also been in the news recently after a hack by rogue AI agents that escaped OpenAI’s testing environment. Beyond hosting AI models, it offers datasets, software libraries and cloud services used to build and deploy AI applications.
The New York-based startup was founded in 2016 by French entrepreneurs Clément Delangue, Julien Chaumond and Thomas Wolf.
(Reporting by Harshita Mary Varghese and Aditya Soni in Bengaluru, additional reporting by Anhata Rooprai; Editing by Pooja Desai and Leroy Leo)
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