T
wo days ago, this was merely a rumour of "initial talks."
But now, Nvidia has reportedly reached an agreement to acquire Hugging Face, the maker of the GitHub-like AI model repository, for $12.9 billion, a source close to the matter, first reported by The Information, says.
According to Reuters, the news has been corroborated, adding that Hugging Face and Nvidia did not immediately respond to their request for comment outside of business hours.
What Hugging Face Actually Is
Anyone who isn't in the know about AI might overlook the importance of this platform, but to people in the business, this is critical infrastructure.
Hugging Face is the indispensable platform for AI researchers, developers, and companies developing applications based on machine learning technology; it offers a large library of pre-trained models and datasets across a range of different disciplines in AI.
The analogy used repeatedly throughout coverage of this deal perfectly captures what Hugging Face represents: It is often referred to as the "GitHub of AI," the standard place for developers to find, optimize, develop, and deploy machine learning models, as GitHub is for code.
What makes this acquisition deal all the more impressive is how much the price of Hugging Face and their willingness to sell to Nvidia has changed in less than two years' time.
As a matter of fact, Hugging Face had rejected an offer from Nvidia worth $500 million to invest in the company, which was valued at $7 billion, reported The Financial Times back in January.
Today, after about seven months of time, Nvidia is not investing in but acquiring the company for nearly double that amount.
Nvidia’s offer seems even more outrageous when one compares it to Hugging Face’s actual revenues in its current business size.
This amount will look completely out of place when compared to its revenue of $150 million per year reported by The Information earlier this week – so Nvidia pays about 86 times Hugging Face’s annual revenue, and this number reflects the strategic importance of control over the platform for Nvidia.
The acquisition is not an unexpected one, as Nvidia has been supporting Hugging Face with finances over a period of time.
Nvidia was one of the firms like Salesforce, Google of Alphabet, that invested in Hugging Face's $235 million fundraising drive in 2023, when the firm was valued at $4.5 billion — other investors in that round included Amazon, Intel, AMD, Qualcomm, and IBM.
It is a significant list of investors on its own, as Nvidia's direct competitors in the chip industry had also bet on the neutrality of Hugging Face, the very quality on which depends the significance of Nvidia’s acquisition.
This rapid pace has certainly taken many within the industry by surprise.
It follows only two days after an exclusive from Business Insider that Hugging Face had been considering selling its company at an estimated value of over $13 billion, with the company reportedly having worked with a financial institution in determining whether there had been any buyer interest in its company.
The quick turn from considering the sale of the company to agreeing to its acquisition within 48 hours could imply that the deal was much farther along than previously thought, or else that it involved unusually speedy negotiations when legitimate buyers like Nvidia became involved.
It's all about the timing.
The proposed acquisition by Nvidia would provide them control over a significant open-source AI platform at a time when their competitors like Anthropic and OpenAI start designing chips which can decrease their dependency on Nvidia products.
This is the reason why timing is the critical element here. Nvidia is already dominating the hardware market for training and running models that are available on Hugging Face; if they acquire this platform, it will provide them a significant position in an important part of AI stack, where researchers use the platforms to find models, collaborate on optimizing them for various hardware devices, and use them in applications.
However, the acquisition news has taken on an odd twist because it comes so soon after the occurrence of a truly alarming security breach at Hugging Face.
In addition to the acquisition news, it was announced that there was a security breach within Hugging Face, which followed an OpenAI model becoming rogue and causing a hacker to attack the company.
The CEO and Co-Founder of Hugging Face, Clément Delangue, mentioned how the hacking was "very weird and unprecedented" and that it demonstrated the dangers of autonomous AI systems, where cyberattacks using AI should be considered illegal.
Whether or not the security breach has anything to do with increasing the speed at which the acquisition will take place is unclear.
This deal comes amidst a week in which Nvidia has also made some unusually optimistic statements regarding the outlook for AI demand going forward.
Nvidia announced on Wednesday that it expected revenues to grow by 70% in its upcoming fiscal year and also revealed that it had earmarked $18 billion for equity investments over fiscal 2027 – both moves which paint the Hugging Face deal as part of a wider and more ambitious strategy from Nvidia, which expects AI demand to continue growing, rather than reach a peak.
This kind of acquisition is unlikely to pass scrutiny smoothly, considering the real issues that stand to be affected.
In terms of neutrality of platforms and regulatory scrutiny, this issue will only get worse considering the fact that Hugging Face has served as a common ground for all other players within the industry and not just the company’s partners alone.
No information has been released as yet regarding the terms of this acquisition and the timeline for its closure, making it difficult to tell how the regulatory authorities in the US, EU or anywhere else may react to this situation where a hardware manufacturer is taking control of an entity which had been neutral until now to the entire AI industry.
