Nvidia’s decision to buy Hugging Face might not seem logical if you look only at the numbers. However, it makes more sense as a way for Nvidia to protect its long-term business.
The $12.9 billion deal, announced Thursday, is a big investment compared to Hugging Face’s size. The company brings in about $150 million in yearly revenue, so Nvidia is paying around 86 times that amount.
That amount of revenue is small compared to Nvidia’s overall business. What really matters is Hugging Face’s community of 18 million users. Nvidia wants to encourage these users to build AI applications using its hardware. The CEO of Hugging Face said he hopes to grow the user base to 100 million in the next few years.
Right now, most of Nvidia’s revenue comes from a small number of big customers, like OpenAI, which uses Nvidia hardware to train its top models. But OpenAI also uses custom chips made with Broadcom, and other tech companies are trying to depend less on Nvidia. Hugging Face could become a platform where new AI developers grow until they need a lot of chips.
Raymond James called the deal a way for Nvidia to protect itself as more AI companies move their work to custom hardware from companies like Broadcom and Marvell.
Nvidia says it will keep Hugging Face as a neutral place for open AI development and will not force developers to use Nvidia chips. Some people are skeptical and think Nvidia might promote its own hardware more once regulators stop watching closely. However, doing that could push developers away and hurt the platform’s value for only a small revenue boost. StoneX Research said Nvidia’s promise to keep choices open for models, cloud providers, and hardware is important for business. They added that the platform works best as a neutral place for discovery and collaboration, with the option to use Nvidia hardware if developers want.
If you look at it just as an acquisition, Hugging Face seems pricey. But for a company worth about $5 trillion, the cost could end up being fairly small as a kind of insurance.
Nvidia’s stock went up in premarket trading on Friday, and other chip companies like Intel and AMD also saw their shares rise.
