Groq Raises $350M and Abandons Its Own Chips

Groq — the startup building LPUs (Language Processing Units), specialized AI chips to rival Nvidia — has raised $350 million in a Series A round. Disruptive led the round; Nvidia, Groq's former chief rival, also participated. The startup's valuation fell to $3.5 billion, down from $6.9 billion in September 2025.

The valuation drop reflects a dramatic turn in the company's story. In December 2025, Nvidia hired Jonathan Ross — Groq's founder and CEO — as part of a $20 billion licensing agreement. The departure of the key founder gutted the team and forced the company to completely rethink its strategy.

Instead of developing its own chips, Groq has pivoted to a "neocloud" model — a cloud data center operator running on Nvidia infrastructure. The company now operates 13 facilities across North America, Europe, the Middle East, and Asia-Pacific, serving more than 6 million developers and companies. By 2027, Groq plans to grow its capacity from 54 to 200+ MW.

Groq's story is a symptom of a broader trend: the AI chip market is rapidly consolidating around Nvidia. Companies that launched with the ambition of dethroning the leader are increasingly becoming its customers and partners. Groq's case also illustrates how the departure of one key founder can cost a startup nearly half its market value.