Nvidia's $20B antitrust loophole
ossa-ma.github.io
ossa-ma.github.io
So if VCs are getting paid a certain share price, employees with vested stock almost certainly are getting the same price. And probably employees with vested options can either exercise now or will just get paid the net during the transaction.
Yes, the company is probably doomed so people staying there are not doing well, but they also just got paid a 3x premium on their vested equity.
Unlike Windsurf... who's 2nd employee only got 1% of what their shares were worth (https://news.ycombinator.com/item?id=44673296)
Unfortunately, we could likely find thousands of different ways not to pay employees given they don’t have board seats, and are typically on non standard equity.
Purely from a social contract lens, why would founders actively seek out ways to cut out their employees from a (potentially life changing) exit.
- secondary transaction with the preferred shareholders (VCs) at some price that implies a 20b valuation
- founders quit and get new employment agreements
- some cash is transferred to the company as a license fee
- no acquisition means no DOJ approval
in this scenario the headline can be $20b but the cash expense can be much lower, you have full flexibility to direct whatever cash or equity you want to founders vs the rest of the company, as an up front payment or as retention/salary, and the founders have no hinderance from working on anything they touched at previous company because of IP license.
I actually bet this is how it went down. This is becoming the standard in the industry and it's just awful for the future of SV
Has there been any evidence yet that the VCs got paid for their shares but the left behind employees didn’t?
You can’t stop the founders from leaving, but selling the crown jewel IP in a transaction that doesn’t benefit the shareholders seems a stretch.
as long as the transaction is reasonable, they've held up this fiduciary duty.
And the minority holders will need to sue for damages in any case, it's not an "automatic" crime. The cost of that suit will be more than the value of the gains and damages awarded.
Therefore, minority shareholders in a startup are highly likely to get screwed - not to mention they don't get a say in decisions being made at the top.
The only thing preventing this is social pressure (ala, reputational damage, if the founder did it). And if the payday is high enough, the reputational damage is irrelevant (you'd be out of the game with a big enough payday!)
In many cases this is so, but here we are talking about tens of billions in value. Even a few percent of value won is worth lawyering up to the hilt for.
> as long as the transaction is reasonable
What does “reasonable” mean? If the OP is correct and selling the IP guts the company then it seems hard to justify. I also don’t think you can reduce the concept of fiduciary duty in this way. It’s a well-defined term of art with specific precedent.
The counterpoint would be that 3 months ago they raised $750m at a $6.9B valuation. Unless they are burning through that cash so fast that they need to start raising immediately, the missed target shouldn’t be an existential blow.
>"Non-exclusive" means no monopoly concerns (anyone can license Groq's tech)
- except that you can bet only Nvidia gets the absolute top of the line architechture and design - - - - - all others get 2nd best or worse.
>The "non-exclusive" label is legal fiction. When you acquire all the IP and hire everyone who knows >how to use it, exclusivity doesn't matter.
But the “non exclusive” part is what significantly weakens any case the US DOJ may consider bringing forth, if at all..
If I was in the Nvidia camp I would be admiring how brillant the strategy was all formulated, in fact, I have to believe that IP attorney's were consulted on how best to avoid DOJ scrutiny.
On the other hand, there will be those who can see how this limits competition. It would be interesting to have some of our HN attorneys weigh on on this deal.
As you said about the remaining employees: . . . Their equity is worthless. . . <they> got nothing while Chamath made $2B. Is Chamath a conniving scoundrel ? I'll let others judge. Maybe someday we'll see Zuckerberg and Chamath in the ring together - - Elon seems to have bowed out.
I guess we just need to wait and see if the common holders are happy or sue.
it’s true, you can’t. however the VCs and the employees don’t own the same shares. even the VCs in different rounds don’t own the same shares.
where TFA analysis falls short is assuming employees have to be paid out at all. since the execs are moving over, there’s definitely some equity being traded in this “non-exclusive licensing deal” but it doesn’t have to involve common stock at all.
It does bring up a curious question - what happens to the Groq equity owned by the leadership team that's being hired by Nvidia? And/or VC equity?
If they're all being paid, then is Nvidia left holding that equity? Or is it being returned to Groq (the company)?
One of two things would seem to be true:
- Nvidia now owns a big chunk of Groq
- Remaining investors in Groq now own a lot more of the company (on a percentage basis)if this does end up being something that is legal and successfully circumvents anti trust, does it mean antitrust actually is a failure in practice?
2026 hasn't even begun and more shenanigans are in flight.
the fix is we use more ambiguous words or just stronger government control
see how China "control" capitalist on this case if you want absolute government control
my point is making a law that a "future proof" is impossible, since guess what???? Human just cant account for every possible future scenario
Hard disagree given that a lot of fintech innovation is increasingly devious ways to circumvent the spirit and the letter of the law
> … and VCs would face the choice of taking half the payment and fucking over workers, or taking the same size payment while not fucking over workers. They may be selfish, but there not so self-destructive as to choose the former out of spite
Also hard disagree. The VC and investor people I’ve met and work with seemed to have a cultural aversion to labor being anywhere near the same level of compensation or power as them. I would fully expect them to take a deal that fucked over the employees if they got paid the same either way.
You’d have to tune your suggested system so that not fucking over the employees was heavily incentivized
You had a history of guidelines-breaking comments and moderator warnings up until a few years ago, and we've not seen any comments from you until the past month or so, and now you're back into those bad old patterns. You are of course welcome to participate here. But this is only a place where people want to participate because we have clear guidelines, and most people take care to observe them. Please do your part to raise standards here rather than dragging them downward.
If it was a one off we’d be content to leave it flagged and move on but we’re talking about a pattern from years ago that seems to be resuming, and we need you to end that pattern now, thanks.
That's what y'all sound like.
Credit where credit due: "creative regulatory evasion" was first attributed to Professor Michael P. Fleming of the University of Cincinnati College of Law to describe the tactics employed by the small loan industry to circumvent early 20th-century usury law.
Seems this would likely be one of the most salient terms the DOJ would use at trial.
If it was a normal acquisition, it would automatically trigger anti-trust investigations. Under the current administration, I think it is unlikely the acquisition would be blocked (although it probably should be...), but it would involve more bureaucracy, and would take longer.
But even more importantly, NVIDIA is literally paying extra to the feds right now from each GPU sold to China. So they are "in good standing".
Why we allow such blatant bribery is another question.
Nvidia to buy assets from Groq for $20B cash - https://news.ycombinator.com/item?id=46379183 - Dec 2025 (400 comments)
Nvidia just paid $20B for a company that missed its revenue target by 75% - https://news.ycombinator.com/item?id=46403041 - Dec 2025 (133 comments)
https://www.reuters.com/business/google-hires-windsurf-ceo-r...
BTW, the FA says Nvidia bought the patents. That’s probably an overstatement. Grow said non-exclusive licensing and Nvidia hasn’t said anything.
I think Nvidia licensed the IP and ‘bought’ (handcuffed) the people.
Nothing, but they likely can't implement it as well as they could had they bought Groq first.
Is it really a given that GroqCloud is going to be sunset and the company will die?
Couldn’t this company hire talent and continue to operate and maybe even innovate? Couldn’t Groq even hire back some employees from Nvidia? If any of them live in California there’s nothing stopping them and they have a bunch of cash from Nvidia. There are all kinds of loopholes for that like contracting arrangements.
Nvidia doesn’t really have exclusive access to any part of the company. They didn’t necessarily remove a competitor, though I’ll grant that they likely did in practice.
It’s potentially possible that the regulations did their job and kept a competitor on the market, though again I imagine this is my naevity speaking and that the most likely outcome is that Groq will wither.
I also don’t fully understand if the Saudis are getting cashed out or not. Are they really going to roll over and allow their Saudi AI data center to become worthless? I would think they have a lot of motivation after this deal to make sure Groq still operates and serves their goals.
If you're just a worker then demand fair market wages, work healthy hours, and treat your useless class of shares as already used and discarded scratch off lottery tickets.
I definitely don't have any illusions that this is based on a number of personal factors (e.g. my overall financial situation making any additional income not likely to drastically change my quality of life and the somewhat unorthodox medical needs of someone in my family causing me to need to talk to the insurance company a few times a year to sort things out). The comment at the beginning of this thread was asking " Who would join a startup these days?" though, so my answer is basically "someone like me". I don't pretend to have any idea how many others like me there are, only that the tradeoffs for larger companies don't really make much sense for me.
I fully expect to be lied to repeatedly though about my own pay, our prospects, etc. I had to learn the hard way that these lies are defacto legal because employees won't realistically be able to sue.
But hey, the base pay is probably enough.
A lot of good engineers are out of work. They'll gladly take what they can
The best we can do is try and make “options have an EV of 0, startups aren’t worth it, join a FAANG” a widely-known meme in places like HN to keep as many people as possible from having to lean this the hard way. We’ll never save everyone, but at least it’s more widely-known than it used to be.
The problem imo is when you actively lie to me. I won't go into specifics, but I was lied to , said F em, went the legal route and got smacked down.
It's not even worth a name and shame. Just sip a shot of whiskey and try to move on. This is why I like contract jobs. Ain't no equity. It's much more honest.
If you don't want your employees holding shares, then tell them to sell their shares during the seed rounds where you will give them a chance to liquidate and renegotiate the shares allocation. Your employees now have a strong incentive to make it to the next seed round and the bigger the round the better.
The current system appears to be suboptimal for both parties. Employees receive options as replacement for a lower salary, but the founders don't actually want to give up control over the company. This means you now have the worst of both worlds. The employees know they will get shafted and value the options at zero, which kills the productivity incentive. The founders have given away options for nothing and now need to engineer a situation where the options are as valuable as the employees think they are.
Is FAANG even still hiring en masse? The sense I get is that FAANG hiring rates, especially for new grads, are very different pre- and post-ZIRP.
edit: which doesn’t mean join companies you don’t believe in! Please do. But don’t expect it to be there, don’t include it in life plans, don’t pay attention to valuations, etc.
Most importantly, there is no guarantee there will be any payout at all. It’s not an acquisition and we don’t know the terms.
What I'm reading here is 100% envy and resentment of their success. But that only works if you're already rich or president, preferably both for best results.
You should be asking why no one has dispelled the criticisms of how employee equity is treated in this deal - neither Nvidia nor Groq’s founders nor regular employees. Lots of people have raised this concern. Should be simple to answer, right?
As for people with no skin in this deal “whining” - why wouldn’t people raise concerns? It’s a disturbing trend. These are highly unusual deals made to circumvent the law and break norms, on antitrust and employee compensation. They’re suspicious and prior examples have stolen from employees. So distrust and scrutiny by default is completely justified.
https://www.teamblind.com/post/first-windsurf-now-groq-p8jey...
"all groq employees got cashed out, no one is getting screwed here. windsurf is different."
But wait, wait, don't tell me... How do we KNOW this REALLY is a groq EMPLOYEE? It COULD be a PAID shill blah blah blah WINDSURF! WINDSURF! You can't hide the TRUTH forever!
Even fresh grads with no experience take home more in this town.
I live to work, and I'd be willing to spend a few more years in student-apartment quality of life, and to work like a strategic asset to make the startup successful. But I've learned that deal should include a FIRE lottery ticket, not a condo downpayment lottery ticket.
If your early startup doesn't want to share significant equity, https://levels.fyi/ provides TC numbers of what established companies are paying, even for people who wouldn't be good for a startup.
Maybe it's the recent years of what VC culture has devolved to. ("Why is your cap table cutting in early key hires significantly? Do you have a leadership problem, bro?") Maybe this is just another facet of the "mask-off" or "late-stage capitalism" that people have started calling out in other facets of society.
We wouldn't want someone accepting a small fraction of their market salary to get even 1% pre-dilution of an early startup (even in dark-pattern options), because that might align them with company success, or even be fair.
Maybe I'm just completely out of touch, and hardware has never been my expertise, but does it take O(days) and not O(years) to build data centers these days? I know Grok DCs in Memphis were built under a year cutting many corners and using plenty loopholes, but even by those standards, bringing up a full data center in just over a week sounds impossible without some insane construction automation to me.
You can call up Cisco tomorrow and offer them a billion dollars to get you an entire datacenter worth of switches tomorrow and the answer is going to be no because they just don’t keep that much inventory sitting around. That’s why covid was such a shitshow.
I should give a caveat of: they could in theory redirect existing orders to you but would likely be violating contractual obligations and risk a lawsuit from the fortune 500 Peter they robbed to pay you Mr. Paul.
If that's the case, it's saddening to see details like this hyped up to borderline fraudulent levels.
They are purchasing crypto infrastructure for a huge premium, importing massive turbines from old generation facilities, making huge personal investments in nvidia stock for "preference", and acquiring companies that happen to have an order.
It went from we need to make a data center as cost efficient as possible to we need a data center at all costs.
This is depressing.
We’ve entered a new era. Big companies don’t need your startup. They only need your smart guys. Just those few guys. You keep the rest of your engineers and figure out what to do with them.
And lately, the answer has been, “wind it all down”.
This sucks so bad for most of their employees. But it’s a signal to the labor market:
Be very honest about what you are when you’re considering working at an AI startup. Are you an AI expert? Or a TF/Pytorch monkey? There’s an enormous difference between those two things. If you’re not the key guy, require a good salary up front. Because I don’t see a future where the “acquiring” companies start needing you as well.
Or... Maybe we should start to think about how we let corporations get bigger and bigger? What happens if an entity (read: company) becomes so valuable, that it is basically indestructible? Does it have the power to change politics to their discretion? And as such, also influence the legislative?
I find that highly concerning.
I don't see how we're not already there. There's no competition, only an oligopoly splitting their spoils.
Unfortunately, the time to be having these conversations was 40 years ago.
But you know the old saying: the next best time is right now.
It is, sadly, a near-impossibility that we could get decent antitrust under the current administration. But if we techies, as a sector, were able to pull ourselves together, genuinely recognize that the level of consolidation we have is very bad, and start collectively advocating for real change—for something more like what Lina Khan was doing under Biden, reversing the Reagan-era shift to the intellectually and morally bankrupt Chicago School interpretation of antitrust, and going back to actually forcing companies to prove that acquisitions will be good for everyone else, rather than forcing opponents to prove that they'll be bad in very specific ways...
Then we might have a chance to make real change, over the course of the next few years.
Now, how do you stop that?
Companies don’t need to buy startups, they just need the expert that startup hired. Once they have the experts, everything else takes care of itself.
Point is, antitrust works fine. It just fixes the wrong problem. That was really the problem with khan. She never really figured out that the technologies have passed the legal framework by. She should have tried to come up with solutions to the problem of monopolizing intellectual capital rather than the problem of monopolizing markets or intellectual property.
This isn't about the people being hired; it's about the company that's trying to headhunt them.
And, once again: robust, sane antitrust would never have let one company get as big, as vital to the tech sector, and wielding as much power as Nvidia does in the first place. If there were 8 companies that do what Nvidia does, letting one of them hire these guys wouldn't be nearly as much of a big deal.
> Point is, antitrust works fine.
Not the way we've been doing it, it doesn't. Like I said, that's the whole point.
The $1.5B contract with the Saudi Arabia is substantial and investors will want that monetized too, there are also existing DCs GroqCloud have in the ME region and also other spots around the world that are quite valuable for their hardware and power agreements etc.
Nvidia has CIFUS and other regulatory concerns and also don't want to compete against their customers be a neo cloud provider, the Saudis likely still want their DC build outs to proceed.
All this to say, the remaining parts while no longer as glamorous is still worth a lot and cannot be easily sold to big tech co. GroqCloud is more be like Nokia Technologies/ Networks rather be killed.
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As a result, staff not part of the Nvidia deal likely have solid jobs and also now the opportunity to climb the ladder quickly now that a lot of leadership positions have opened up.
They are also going to have to be compensated higher in cash or poached by an upcoming chip startup as they are no longer tied to equity options vesting scheduled of a very valuable company (Pre deal Groq or now Nvidia).
In any scenario they will come out better of the deal, not as much they could have in a full acquisition yes, but certainly better than most engineers not working for a hyped AI startup nonetheless.
Also tenstorrent could be a viable challenger in this space. It seems to me that their NoC and their chips could be mostly deterministic as long as you don't start adding in branches
Like Groq's chips only have 230MB of SRAM per chip vs 80GB on an H100, training is memory hungry as you need to hold model weights + gradients + optimizer states + intermediate activations.
It claims they serve Llama 2 7B @ 750 tokens/s with 2K context, but over on OpenRouter Groq is listed as serving Llama 3.1 8B @ 1300 tokens/s with 128K context. (And the official GroqCloud site says 840 tokens/s.)
I have some doubts about this point. IP is IP, independent of the people who invented it. If a different hardware company were to also pay for a non-exclusive IP license, maybe it will just take a few months to catch up. It’s like inheriting a codebase written by another team, and there will be some pain and some time needed to integrate it.
In fact if GroqCloud wishes to survive, it should very well just attract licensees for its IP and collect license fees for the foreseeable future.
- Avoids regulatory scrutiny (for now at least)
- Nobody is actually entrenched enough for customers to matter
- Weird "celebrity" culture in tech, and AI especially. Everyone is looking for a "whisperer" or a "godfather" or whatever.
- Investors still get paid out
Smart operational talent will probably adapt by demanding higher salary, signing bonuses, severance packages in lieu of equity. Distribution of the true "lottery tickets" will get more uneven.
That really diminishes attractiveness of working in a startup where all your efforts could be swooped out by a big player via just buying IP and acquihiring founders for a price cheaper than buying the whole company and without the hustle of regulatory scrutiny. Big tech literally kills competition and innovation guaranteeing its monopoly.
I'm a fan, and I use Groq a lot for systems I build. I think they offer something different to most other providers (cheaper, faster, and until recently "we don't store your data by default") and it will be sad to see that fade.
There was a major thread on the issue of regulatory regimes and the dysfunction that can arise. How is this acquisition not a textbook example of said dysfunction? This non-acquisition acquisition does not happen at all in a world without IP law.
I think we're seeing a culmination of the dysfunction that results from IP law. The sheer amount of capital has given unbelievable momentum to the forces of consolidation. I still can't foresee the endgame (who can?) but it's even harder to see how it'll turn out well.
Where the premium was spent:
Regulatory arbitrage:
Non-exclusive licensing avoids years of antitrust review. Structure the deal as IP licensing + talent acquisition, and regulators have no grounds to block it.
This alone is worth billions in time and certainty."
Isn't that fascinating!
Observation: For any given Deal (in business or in life in general) -- there may be one or more legal components -- to it...
But (equal-and-oppositely!) there also may NOT be one or more legal components to it!
What each deal has in some legal components -- it may lack in other legal components...
Conversely, what each deal does not have in some legal components -- it may have in other legal components...
Now, perhaps this may sound like a "self-evident truth", and as such, apparently may not be worthy of a deeper exploration, but it seems that there exists an:
Intersection of Set Theory and Legal Aspects -- applied to Deals
(AKA "Transactions", "Exchanges", "Barters", "Trades", "Exchanges Of Value", etc., etc.) in various jurisdictions (which can be thought about as how contracts, both legal and natural, arising from such exchanges are, or would be interpreted through its courts, through its regional statutes (aka "Laws") IF there are inter-party disputes which subsequently require a court for such interpretation...)
And that intersection -- could well be worthy of further study!
Phrased another way -- it (and this article!) are highly interesting from a legal perspective!
(And also a Set Theory / Set Theoretical one!)
Moving data is not that expensive, many times there's no overhead over the nominal consumption of your system.
The rest of the article is spot on, though.
Matthew Berman (youtuber) mentioned he's invested in groq and found out same time as everyone else. Guessing he's a small/indirect investor but still telling
Why didn't I get any money from my startup? - A guide to Liquidation Preferences and Cap Table
https://old.reddit.com/r/startups/comments/a8f6xz/why_didnt_...
I have told people that before they join a startup ask about the liquidation preferences and cap table. If the ownership doesn't tell you then consider that a red flag.
I would add this new Groq scenario to the list of questions to ask. "Can you and the executive team go to another company with the IP leaving the employees behind with stock worth $0?" Maybe phrase it better than that but I know a few former coworkers at Groq. I didn't know them well but this probably stinks for them.
In an America with robust, sane antitrust, first of all, a company as big as Nvidia probably never exists in the first place. Second of all, if it does, an "acquihire" like this will have to pass regulatory muster, regardless of whether it's a full-on corporate acquisition.
Because in an America with robust, sane antitrust, if a company as big as Nvidia does exist, it is operating under fairly tight strictures as a company with heavy market dominance. It does not get to just act like any other company.
That's what antitrust law is for.
Nvidia to buy assets from Groq for $20B cash
I assume it's more about what Groq had that Nvidia didn't want, which was competition (in inference hardware).
Groq is more of a hardware focused company.
this is just panic buying to make stronger foothold
I'm happy that the investors and founders got a long and well deserved exit. I'm happy that the tech here will continue to see development and investment under Nvidia so we may one day get to use Claude Opus at 500 tokens per second.
Does it suck that certain employees got screwed over? Yes. Does this happen ALL THE TIME in startups? More often than you think. The expected value for employee options for this type of company is very very close to zero. Anyone who thinks otherwise is lying to themselves.
Does it suck that it didn't happen via a normal M&A process? As someone who used to work on tech M&As as an attorney, I would be first one to say that I hope this DOES become the norm. M&A sucks for the employees, the investors, the founders, the acquirers - it sucks for EVERYONE. The only people who it doesn't suck for are the lawyers and bankers who earn more fees the more complex and longer the process is. Best M&A I ever witnessed was the FB acquisition of Instagram that happened over the weekend (my old law firm was part of that deal).
Ask yourself: do you want to spend 2% of your funding round and 2 months on lawyers when you raise a $5m Series A? Then why do you want to do the same when you exit?
Any employees of those companies lurking here? I'm curious how the morale is now.
Nvidia explicitly did NOT acquire Groq. They licensed the IP and hired the talent. This structure dodges CFIUS review (Groq had $1.5B in Saudi government contracts), antitrust scrutiny, and years of regulatory delays.
The $13B premium over the September valuation was the cost of regulatory arbitrage. Announced Christmas Eve while Trump's AI Czar (Chamath's All-In podcast co-host) is in office. Chamath's Social Capital made AT LEAST ~$2B on this exit.
My article breaks down: what Nvidia actually bought vs what they left behind, why the deal structure matters, who got paid, and the political connections nobody's talking about.
>Let's look at the sh he dumped on retail with his abysmal SPAC track record
I do not see why one would feel animosity towards Chamath for this reason. Was there fraud involved? Otherwise, all investors are liable for doing their own due diligence.
The other part is he has a track record of dumping on retail then telling them not to buy his next deal once he's already cashed out.
Do you still need them to commit a crime when they are rich and powerful, and connected with the current administration that sets the law?
If a new law came out that said Chamath can do whatever he wants and it’s always legal, is it impossible to hate him in your worldview?
In the meantime, Musk and Chamath have the gall to complain about the kleptocracy in democratic states and the poor suppressed billionaires:
https://xcancel.com/elonmusk/status/2005287147507769442#m
I wonder when Chamath will sit again on Tucker Carlson and tell a sob story about having self doubts.
Sounds like the media is truly the one in charge.
Really? At least for LLMs, most actual usage is concentrated on huge SOTA models. 1 trillion parameters or more. And LLMs seem to be the lion's share of AI compute demand.