Nvidia agreed to buy Hugging Face for $12.9 billion, The Information reported Wednesday night, citing a source familiar with the matter. Business Insider, which first reported over the weekend that Hugging Face was interested in an acquisition, reported late Wednesday that the talks, which would value the company at more than $13 billion, had not yet produced a signed deal and could still atomize.
TechCrunch previously reached out to Nvidia and Hugging Face for comment, and neither have responded yet. (Nvidia’s silence is particularly notable here, as the company has acted quickly in the past to address reports it considers inaccurate.)
Maybe it was destined from the beginning. Hugging Face, founded in 2016, is one of the most popular hubs where developers share and download open source AI models. Buying it would give Nvidia a strong foothold in the open source AI world, just as open source developers are doing their best to catch up with closed AI systems from companies like Anthropic and OpenAI.
Why would Nvidia want that? The most obvious is to protect its dominance in AI chips, which, at least from the outside, looks increasingly at risk, even with Nvidia’s aggressive chip launch schedule. Virtually all of the largest closed-source AI labs (OpenAI, Google, Amazon, and Anthropic) are now in the process of building their own AI chips to reduce their dependence on Nvidia. A thriving ecosystem of open source AI models gives customers more alternatives to those closed labs, which in turn makes more of the market reliant on Nvidia hardware. That’s also why Nvidia has already invested tens of billions of dollars in building its own open source AI models.
Should we be surprised that Hugging Face’s days as an independent group seem numbered? Not precisely. Hugging Face CEO Clem Delangue has spent much of this year publicly aligned with Nvidia’s open source push, amid a debate that has been brewing for months, as officials in Washington reportedly weighed restrictions on open-weight models. (Chinese labs like Moonshot AI had launched systems, like its Kimi K3 model, that matched leading American models in benchmarks and cost much less to operate, and as a result rumors grew in Washington about competitive and national security concerns. Some critics of the closed labs, such as White House adviser David Sacks, suggested that those fears were being stoked by the “duopoly” of Anthropic and OpenAI.)
In an appearance on CBS’ “Face the Nation” earlier this month, Delangue said Hugging Face used an Nvidia-modified version of an open-source Chinese model to defend itself after a cyberattack and pointed out a recent letter – signed by Nvidia CEO Jensen Huang and 24 other companies, including Hugging Face, urging the US government to support open models rather than restrict them. In a separate CNBC interview in late July, Delangue made similar points, citing that same letter and warning that China is “clearly dominating” open source AI.
The deal would also mark a return of sorts for Nvidia to cloud computing. Nvidia supposedly reduced his own cloud business, called DGX Cloud, about a year ago. But according to The Information, owning Hugging Face, which already helps developers run their AI models using rented computing power, could give Nvidia a path back into that market without having to start from scratch.
There is also a financial safety net at play. Nvidia has promised to help cover the cost of tens of billions of dollars in cloud computing deals for its customers. If those customers end up not using all the computing power they signed up for, Nvidia could be stuck. Owning Hugging Face would give Nvidia the ability to sell that unused capacity to Hugging Face customers.
The price marks a big jump from Hugging Face’s last known value. The company raised $235 million in 2023 in a funding round that valued it at $4.5 billion. That round was led by Salesforce Ventures, and money also came from Alphabet’s GV, IBM Ventures, and Nvidia itself, among others.
This wouldn’t be Hugging Face’s first brush with an Nvidia offering either. Hugging Face rejected a $500 million investment offer from Nvidia late last year that would have valued it at $7 billion, the Financial Times previously reported. Hugging Face said at the time that he did not want a dominant investor who could influence his decisions.
As for why I would say yes now, one could argue that a buyout is different from signing on a giant sponsor, a scenario that often means giving up control while being pressured to continue growing.
Hugging Face also remains a comparatively small company in terms of revenue in the AI world. The Information reported that it was recently generating about $150 million a year in revenue, up from about $100 million just two months earlier.
That growth has allowed the company to approach profitability, as Delangue told TechCrunch last month. Still, a price close to $13 billion would be a huge multiple for a company of this size and difficult to resist.
Not lastly, the deal would give Hugging Face access to Nvidia’s much deeper pockets just as other AI infrastructure competitors are beginning to be attracted to other teams, as suggested by Stripe’s recent agreement to acquire OpenRouter, a startup founded in early 2023 that helps customers select different AI models to perform different tasks depending on their needs and budget.
OpenRouter was valued at just $1.3 billion in May during its Series B round. Stripe reportedly paid more than 7 billion dollars to make it yours early this month.
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