Nvidia is reportedly set to acquire Hugging Face for $12.9 billion, as indicated by a report that surfaced Wednesday night, referencing a source familiar with the negotiations. Earlier reports had suggested that the talks—which value Hugging Face at over $13 billion—are still ongoing and no finalized agreement has yet been reached.
TechCrunch sought comments from both Nvidia and Hugging Face, but neither party has responded thus far. Nvidia’s lack of communication is notable, given the company’s history of promptly addressing inaccurate reports.
Founded in 2016, Hugging Face has emerged as a leading platform for developers to share and download open-source AI models. Acquiring Hugging Face would significantly enhance Nvidia’s presence in the open-source AI arena, especially as developers strive to compete with proprietary systems from firms like Anthropic and OpenAI.
Why would Nvidia pursue this acquisition? The most pressing reason lies in safeguarding its stronghold in AI chip production, which increasingly appears vulnerable. Major AI laboratories such as OpenAI, Google, Amazon, and Anthropic are actively developing their own chips to reduce dependence on Nvidia. By fostering a dynamic ecosystem of open-source AI models, Nvidia can provide customers with alternatives to these closed systems, thus maintaining reliance on its hardware. This strategy aligns with Nvidia’s substantial investments into its own open-source AI models.
The prospect of Hugging Face losing its independence isn’t particularly surprising. CEO Clem Delangue has openly aligned with Nvidia’s open-source agenda this year, amid discussions on potential restrictions on open-weight models by U.S. authorities. Concerns arose following the release of competitive AI systems from Chinese companies like Moonshot AI, which matched U.S. benchmarks at lower operational costs, igniting debates about national security.
In a recent appearance on CBS’s “Face the Nation,” Delangue discussed the company’s use of an Nvidia-altered version of a Chinese open-source model for cybersecurity defense and referenced a letter, co-signed by Jensen Huang and 24 others, advocating for governmental support of open models. He reiterated his concerns about China’s growing dominance in open-source AI during a CNBC interview.
Should the acquisition go through, it could signify a resurgence for Nvidia in cloud computing. The company previously downsized its own cloud venture, DGX Cloud, about a year ago. However, acquiring Hugging Face, which assists developers in utilizing rented computational resources, might allow Nvidia to re-enter the cloud space without starting over.
Additionally, there is a financial aspect to consider. Nvidia has committed to subsidizing billions in cloud computing contracts for its clients. If those clients do not fully utilize the resources they’ve contracted, Nvidia could face losses. Owning Hugging Face would allow Nvidia to sell any excess computing capacity to its customers.
The proposed acquisition represents a substantial increase from Hugging Face’s last known valuation of $4.5 billion, following a funding round in 2023 that raised $235 million from investors including Salesforce Ventures and Nvidia.
This wouldn’t be Hugging Face’s first encounter with an Nvidia offer. Last year, Hugging Face declined a $500 million investment from Nvidia that would have valued the company at $7 billion, citing concerns over having a dominant investor influence its decisions.
The current circumstances might suggest a more palatable buyout, distinguishing it from the situation of having a major single investor, thus allowing for greater management autonomy.
Hugging Face, while on the rise, still operates with relatively modest revenue in the AI sector, reportedly generating about $150 million annually, an increase from roughly $100 million just two months prior.
This upward trajectory has placed the company near profitability, according to Delangue. Nevertheless, a valuation close to $13 billion would be significant for a company of this scale, making it a difficult offer to decline.
Moreover, the potential deal would provide Hugging Face with access to Nvidia’s extensive financial resources at a time when other AI infrastructure companies are getting absorbed by larger entities, as evidenced by Stripe’s recent $7 billion acquisition of OpenRouter, a startup focused on helping clients select AI models based on their needs and budgets.
OpenRouter was valued at just $1.3 billion during its Series B funding round earlier this year, illustrating the competitive environment in the AI sector.
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