Nvidia got Groq’s technology and talent. Now it’s turning the rest of its former rival into a customer.

Nvidia is squeezing even more value out of its deal with AI chipmaker Groq by turning a former rival into a customer.

Groq said Wednesday it plans to put Nvidia systems in its data centers — meaning customers of its AI cloud service, GroqCloud, can access Nvidia technology alongside Groq’s signature language processing units (LPUs), chips designed as a fast and efficient alternative to Nvidia’s AI chips.

It’s an about-face from where the companies started — and highlights Nvidia’s strategic approach to fending off competition, analysts said.

Futurum Group CEO Daniel Newman said Groq’s surviving entity “is proving something different: that the fastest way to scale in AI infrastructure is to build on Nvidia, not against it.” In December, Nvidia announced it struck a $20 billion deal with Groq to license its technology and hire its senior leadership, including founder Jonathan Ross and president Sunny Madra.

Nvidia has since incorporated LPUs into its product lineup.

At the same time, Groq remained independent and continued operating its AI cloud.

It announced a $650 million funding round in June.

Now that Groq and Nvidia work together more closely, it eliminates some competition for Nvidia. “This makes the original Groq transaction look even more strategic,” said Brad Gastwirth, global head of research and market intelligence at Circular Technology. “It potentially neutralized part of a competitive threat while preserving Groq as a growing platform that can now drive additional demand back toward Nvidia,” he added.

Gastwirth said Nvidia doesn’t need all AI workloads to run exclusively on its chips as long as it can still capture at least some of the business. “It can absorb the IP, hire the founding talent, invest in the surviving entity, and then sell that entity the compute,” Newman said. “Every layer of that sequence deepens the moat.” Gil Luria, head of technology research at D.A.

Davidson, said that the LPU technology was the real prize for Nvidia in the original deal.

While many specialized AI cloud providers, known as neoclouds, were already buying Nvidia’s AI chips, this new partnership with Groq fits a broader pattern of the chipmaker making savvy moves to strengthen its position, he said. “They play chess when everybody else is playing checkers,” Luria said.

Contact this reporter via email at gweiss@businessinsider.com or Signal at @geoffweiss.25.

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