Nvidia pays $12.9 billion for the Hugging Face hub OpenAI wanted as a chip outlet

OpenAI's $100 million ^[1] was about a third of one percent of the $30 billion Nvidia has put into OpenAI ^[9][2]. Nvidia's eventual price is 129 times it ^[2][1]. At the $4.5 billion valuation Nvidia invested at in 2023, the check would have bought roughly 2% of Hugging Face ^[10][5]. A stake that size comes with a commercial relationship and little say over the company. According to CNBC's sources, the relationship OpenAI wanted was a distribution channel for Jalapeño, the custom chip it is making with Broadcom ^[6].

The open-weight models on Hugging Face can be downloaded and run on whatever infrastructure a user prefers ^[17], so a developer choosing a model there has not yet chosen a chip. OpenAI relies heavily on Nvidia's hardware ^[9], and it wanted to put its own chip in front of those developers. According to CNBC, the chip part of the pitch is what caught Jensen Huang's attention, and Huang has privately complained about OpenAI's move into semiconductors ^[8].

The same facts fit a less defensive story. Delangue said he approached Nvidia over the summer because it was "a perfect home" for his company ^[13]. The talks moved quickly. "A few weeks later, here we are," he said on the day the deal was announced ^[14]. With AMD also in talks ^[12], Nvidia was bidding against a rival chipmaker as well as reacting to OpenAI. Nvidia has also committed to keeping the platform open and letting Hugging Face keep working with chip vendors other than Nvidia ^[16]. If the aim were to shut Jalapeño out, that pledge gives much of it back. Huang explained the deal in terms of scale: "During the summer, I think we realized that Hugging Face and open-source AI in general was at the turning point, and that it needed more, more resources, more scale, more visibility," he told CNBC ^[15].

I think the defensive reading holds, in a narrower form. The risk Nvidia removed was a chip rival, or a customer building chips, owning the hub. To remove it, Nvidia is paying Hugging Face stockholders $11.9 billion ^[3], about 2.6 times the 2023 valuation it bought in at ^[3]. The reporting covers one lab's approach, OpenAI's, and does not show other AI labs making similar ones.

Timing would prove this wrong. OpenAI's talks began after the July incident ^[5], and Delangue went to Nvidia at some point over the summer ^[13]. If he went before OpenAI came calling, Huang was answering a seller, and OpenAI's chip pitch was a late entry in a sale already under way.