Groq has closed a $350 million funding round at a $3.5 billion valuation, roughly half of what the company was worth just under a year ago when NVIDIA (NASDAQ: NVDA) signed a licensing agreement with the startup and poached a significant portion of its workforce. The deal is expected to be announced on Monday and is led by Dallas-based investment firm Disruptive, according to reports. A Groq representative indicated that NVIDIA will also participate in this round, though the chip giant declined to comment on the matter.

Founded in 2016, Groq was once among the startups racing to develop proprietary AI chips to challenge NVIDIA's market dominance. At its peak in September of last year, the company commanded a valuation of $6.9 billion. Just months later, NVIDIA leveraged a licensing agreement to bring on board Groq's founder and CEO Jonathan Ross along with other key personnel. Other major tech players, including Meta and Alphabet, have similarly absorbed talent from AI startups in recent months through licensing deals rather than outright acquisitions.

Since then, Groq has been working to reinvent itself as a data center operator to address the enormous computational demands of running AI software, a process known as inference. The company previously announced a $650 million funding round in June to support this strategic pivot. As part of that transaction, Groq adjusted its valuation but did not disclose the revised figure at the time.

Where the focus lies

Alex Davis, Groq's executive chairman and founder of investor Disruptive, stated: "There's no question that inference will become the largest and most critical layer of AI infrastructure. We're going to stay focused on supporting the most important model builders." Groq plans to channel a portion of the newly raised capital toward expanding its total data center capacity to more than 200 megawatts by next year.