Nvidia is reportedly nearing a deal to acquire Hugging Face, the platform specializing in open-source artificial intelligence models, for approximately $12.9 billion, according to a report published by The Information on Wednesday, citing a person familiar with the negotiations.
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Business Insider, which reported over the weekend that Hugging Face had attracted interest from potential buyers, said the negotiations valued the company at more than $13 billion but had not resulted in a signed agreement as of Wednesday evening. The deal could still fall apart.
Founded in 2016, Hugging Face has become one of the most prominent platforms for developers to share and download open-source AI models.
The acquisition would give Nvidia a strong foothold in the open-source AI ecosystem, as developers of open models seek to catch up with closed systems developed by companies such as Anthropic and OpenAI.
One of Nvidia’s key motivations appears to be protecting its dominance in the AI chip market, which is facing growing pressure despite the company’s aggressive schedule for launching new generations of processors.
Most major AI laboratories developing closed models, including OpenAI, Google, Amazon and Anthropic, are currently developing their own AI chips to reduce their reliance on Nvidia.
At the same time, the growth of open-source AI models is giving customers more alternatives to the closed models offered by these laboratories. This could help keep a larger share of the AI market dependent on Nvidia hardware.
For this reason, Nvidia has already invested tens of billions of dollars in developing its own open-source AI models.
A potential Nvidia acquisition of Hugging Face would not be entirely unexpected. The platform’s CEO, Clem Delangue, has publicly supported Nvidia’s push into open-source AI for much of this year.
The developments come amid growing debate in Washington over the possibility of imposing restrictions on open-weight AI models.
Chinese AI laboratories, including Moonshot, have released models such as Kimi K3 that have achieved results comparable to leading U.S. models in some benchmarks while operating at significantly lower costs, intensifying concerns in Washington over competition and national security.
Critics of closed AI laboratories, including White House adviser David Sacks, have argued that such concerns are being exaggerated by what he described as the duopoly of Anthropic and OpenAI.
Earlier this month, during an appearance on CBS’s Face the Nation, Delangue said Hugging Face had used a modified version of a Chinese open-source model built on Nvidia technology to defend itself after suffering a cyberattack.
He also pointed to a recent letter signed by Nvidia CEO Jensen Huang and 24 other companies, including Hugging Face, calling on the U.S. government to support open models rather than impose restrictions on them.
In a separate interview with CNBC in late July, Delangue reiterated the same position, citing the letter and warning that China was clearly dominating the open-source AI space.
The deal could also represent a return for Nvidia to the cloud computing market.
The company scaled back its own cloud operations, known as DGX Cloud, around a year ago. However, owning Hugging Face—which already helps developers run AI models using rented computing capacity—could provide Nvidia with a path back into the market without having to build the business from scratch.
There is also an important financial factor behind the potential acquisition. Nvidia has committed to helping cover the cost of cloud-computing deals worth tens of billions of dollars for its customers.
If those customers do not use the full computing capacity they have contracted, Nvidia could be left with unused capacity. Owning Hugging Face could give the company an opportunity to resell that excess computing capacity to the platform’s customers.
The proposed price represents a dramatic increase from Hugging Face’s most recent known valuation.
In 2023, the company raised $235 million in a funding round that valued it at approximately $4.5 billion. The round was led by Salesforce Ventures, with participation from Alphabet’s GV, IBM Ventures, Nvidia and other investors.
This would not be Nvidia’s first investment offer to Hugging Face.
Late last year, Hugging Face reportedly rejected an offer from Nvidia to invest $500 million, which would have valued the company at around $7 billion, according to an earlier Financial Times report.
Hugging Face said at the time that it did not want a dominant investor capable of influencing its decisions.
A full acquisition, however, is different from accepting a major investment from a single shareholder. An investment could mean giving up some control while maintaining pressure to grow, whereas an acquisition would provide the founders and shareholders with a clear financial exit.
Hugging Face remains relatively small in terms of revenue compared with the size of the AI market.
The Information reported that the company is currently generating around $150 million in annual revenue, up from approximately $100 million just two months ago.
Even so, a valuation approaching $13 billion represents a substantial multiple of revenue for a company of this size, making the offer difficult to resist.
The deal would also give Hugging Face access to Nvidia’s vast financial resources, at a time when other companies specializing in AI infrastructure are being absorbed by larger firms.
The development follows Stripe’s recent agreement to acquire OpenRouter, a startup founded in early 2023 that helps customers select different AI models for various tasks based on their needs and budgets.
OpenRouter was valued at just $1.3 billion in a Series B funding round in May, but Stripe reportedly paid more than $7 billion to acquire the company earlier this month.
Source: Al Arabiya
