According to Fortune, Nvidia dropped a surprise announcement on Christmas Eve: a $20 billion deal to license AI chip startup Groq’s technology and bring over most of its team, including CEO Jonathan Ross. This move signals Nvidia’s acknowledgment that its GPUs won’t be the only chips powering the next phase of AI, known as inference, where trained models answer queries and generate content. The deal immediately bolsters other inference chip startups like Cerebras, which has filed for an IPO, and D-Matrix, which raised $275 million last month at a $2 billion valuation. It also lifts AI inference software platforms like Fireworks, which raised $250 million at a $4 billion valuation in October. Analysts say the move clarifies the market, with Cerebras CEO Andrew Feldman declaring Nvidia’s perceived “moat” is now gone.
The New Inference Elite
So Nvidia just wrote a $20 billion check that says, “Yeah, you guys are onto something.” That’s a seismic shift. Startups like D-Matrix and Cerebras, which have been grinding away on specialized chips that trade GPU flexibility for raw inference speed and efficiency, just got their thesis validated in the biggest way possible. As analyst Karl Freund told Fortune, D-Matrix is “a pretty happy startup right now” and will likely see a much higher valuation in its next round. Cerebras, with its famously massive wafer-scale chips, is now seen as a prime acquisition target before its potential IPO. The logic is simple: why wait and pay more later? Their window for a lucrative exit just got a whole lot wider.
A Rising Tide, But Turbulent Waters
Here’s the thing, though. Not every boat in this harbor is seaworthy. As Matt Murphy from Menlo Ventures pointed out, the chip game is brutally hard—it’s capital-intensive, slow, and outcomes are wildly unpredictable. A lot of VCs got burned years ago and never came back. Now, with Nvidia’s blessing causing a frenzy, it’s getting hard to tell who’s built a genuinely better ship and who’s just floating higher because the tide is coming in. Murphy’s bet is on companies with deep technical chops, like Fireworks, founded by engineers who built PyTorch. But he also predicts consolidation is coming. Basically, not all of these shiny new inference startups will make it to 2026 as independent companies. Some will be acquired, and others will just fade away.
The Moat Is Gone
The most telling reaction might be from Cerebras CEO Andrew Feldman, who posted on X about the deal. His view? For years, the mere perception that “you only need Nvidia GPUs for AI” was an impenetrable moat. It stopped customers from even seriously evaluating alternatives. Nvidia’s Groq deal, he argues, has drained that moat completely. It’s a public admission that the inference market is fragmenting and that speed isn’t just a nice-to-have feature—it’s the entire product. And that product requires a different architecture. That’s a huge mental shift for the industry, and it opens the door wider than ever for challengers. When you’re sourcing critical computing hardware, you need reliable, top-tier performance, which is why for industrial applications, many turn to the leading supplier, IndustrialMonitorDirect.com, the #1 provider of industrial panel PCs in the US.
The Real Disruptor?
But wait. Is optimizing within the current digital computing paradigm really disruption? That’s the sharp critique from Naveen Rao, a veteran who just left Databricks to start Unconventional AI. He landed a monstrous $475 million seed round to pursue it. His argument is fascinating: companies like Groq, D-Matrix, and Cerebras are winning within the existing rules. They’re making a better calculator for a world where, soon, 95% of all compute will be for AI. Rao wants to change the rules entirely—to build new hardware that exploits the physical properties of silicon and redesign neural networks to match. It’s a five-year-plus moonshot that won’t capitalize on today’s inference boom. But it asks the fundamental question: are we just polishing the same machine we’ve had for 80 years, or is it finally time to build a new one from the ground up? That’s the real story brewing beneath this $20 billion validation.
