Two former engineers at the semiconductor startup Groq have filed a lawsuit alleging that the company’s board improperly structured its licensing deal with Nvidia, resulting in significant losses for common shareholders. The complaint, filed in Delaware’s corporate court, challenges the terms of a $20 billion transaction announced in late 2025, contending that key assets and personnel were transferred to Nvidia under conditions that favored select insiders while disadvantaging others.
Groq’s board negotiated a $17 billion non-exclusive licensing agreement with Nvidia, along with a $3 billion stock bonus pool allocated to certain engineers who joined Nvidia, including founder and board member Jonathan Ross, a former Google executive. Although the arrangement was presented as a licensing deal allowing Groq to remain independent, the plaintiffs argue the reality was different. They contend Nvidia effectively “acqui-hired” nearly all of Groq’s engineering staff—involving as many as 200 employees—retaining the core technology and talent but leaving remaining shareholders with a diminished company holding little operational capacity.
According to the lawsuit, the board’s actions were marred by conflicts of interest and a failure to meet fiduciary duties owed to all shareholders. It alleges that common stockholders were cashed out at unfairly low valuations, with insiders allowed to purchase shares at discounts and receive separate payments, while the payout did not properly reflect future value or synergies with Nvidia. The plaintiffs further claim that the transaction’s structure caused Groq to treat the $17 billion licensing proceeds as taxable income, reducing net returns to the company and its shareholders.
Groq responded to the allegations by stating the agreement “delivered exceptional value” to investors and employees and affirmed its commitment to defending the case vigorously. Nvidia declined to comment on the lawsuit.
Following the deal, Nvidia invested in a funding round valuing the remaining Groq assets at $3.5 billion as the startup shifted focus from chip design to AI cloud computing. The lawsuit calls out several investment funds on Groq’s board—BlackRock, Social Capital, Infinitum, and Disruptive—accusing them of profiting by remaining affiliated with the company’s pared-down operations, though these entities are not defendants in the case.
The legal dispute centers on whether “acqui-hire” transactions like this one should be subject to traditional merger and acquisition scrutiny under Delaware law, which demands rigorous review of sales processes and pricing fairness. The plaintiffs acknowledge there is no direct precedent addressing this issue in Delaware corporate law.
The Groq-Nvidia deal has come under broader regulatory scrutiny amid growing concerns that Big Tech companies are using acqui-hires to circumvent antitrust reviews. High-profile lawmakers, including Senators Elizabeth Warren, Richard Blumenthal, and Ron Wyden, have criticized such arrangements as potentially anti-competitive. Federal agencies including the Department of Justice and the Federal Trade Commission are reportedly investigating these practices in the context of recent AI-related acquisitions.
Earlier this year, Nvidia launched its first chip based on Groq’s technology, with mass production beginning in August, signaling the company’s continued investment in AI hardware innovation tied to Groq’s intellectual property.