Nvidia reportedly agrees to acquire Hugging Face for $12.9 billion

Nvidia has reportedly agreed to acquire Hugging Face for $12.9 billion, according to a report from The Information on Wednesday night, which cited a source familiar with the matter. Business Insider also reported that discussions regarding the acquisition, which would value Hugging Face at over $13 billion, have not yet resulted in a signed agreement and could still fall through. TechCrunch reached out to both Nvidia and Hugging Face for comments, but neither company has responded as of now. Nvidia's lack of response is notable, as the company has previously acted quickly to address reports it considers inaccurate. Hugging Face, founded in 2016, is a prominent platform for developers to share and download open-source AI models. Acquiring Hugging Face would provide Nvidia with a significant presence in the open-source AI sector, particularly as developers are working to compete with closed AI systems from companies like Anthropic and OpenAI. Nvidia's motivation for the acquisition appears to center on maintaining its dominance in the AI chip market, which may be increasingly threatened as major closed-source AI labs, including OpenAI, Google, Amazon, and Anthropic, are developing their own AI chips to reduce reliance on Nvidia. A robust ecosystem of open-source AI models could offer customers alternatives to these closed labs, thereby keeping more of the market dependent on Nvidia's hardware. Nvidia has already invested tens of billions of dollars into developing its own open-source AI models. Hugging Face's potential acquisition is not entirely unexpected, as CEO Clem Delangue has publicly aligned with Nvidia's open-source initiatives amid ongoing discussions about potential restrictions on open-weight models. In a recent CBS interview, Delangue mentioned that Hugging Face utilized an Nvidia-modified version of a Chinese open-source model to defend against a cyberattack and highlighted a letter signed by Nvidia CEO Jensen Huang and 24 other companies, including Hugging Face, urging the U.S. government to support open models. The acquisition could also signify a resurgence for Nvidia in the cloud computing sector, as the company reportedly scaled back its own cloud business, DGX Cloud, about a year ago. Owning Hugging Face, which assists developers in running AI models using rented computing power, could provide Nvidia with a pathway back into the cloud market. Additionally, Nvidia has committed to covering the costs of substantial cloud computing deals for its customers, and acquiring Hugging Face would enable the company to sell any unused computing capacity to Hugging Face's clientele. The acquisition price represents a significant increase from Hugging Face's last known valuation of $4.5 billion, following a $235 million funding round in 2023 led by Salesforce Ventures, with participation from Alphabet's GV, IBM Ventures, and Nvidia. Hugging Face previously declined a $500 million investment offer from Nvidia late last year, which would have valued the company at $7 billion, citing concerns about having a dominant investor. The current buyout proposal may be viewed differently, as it does not necessarily involve ceding control to a single large backer. Hugging Face remains a relatively small business in terms of revenue, reportedly generating approximately $150 million annually, an increase from around $100 million just two months prior. This growth has brought the company closer to profitability, according to Delangue. However, a valuation near $13 billion would represent a substantial multiple for a company of this size. Furthermore, the acquisition would provide Hugging Face with access to Nvidia's financial resources as competition in the AI infrastructure space intensifies, exemplified by Stripe's recent acquisition of OpenRouter, a startup valued at $1.3 billion during its Series B round, which Stripe reportedly purchased for over $7 billion. The article concludes with a note about the startup community gathering to discuss sustainable building in the AI era, along with mentions of various other tech-related news items.