Nvidia (NVDA 1.50%) has dominated the early stages of the artificial intelligence (AI) boom, and this is thanks to the company's top-performing chips. These graphics processing units (GPUs) power the training of models, so that they have what it takes to then go on and do the job of solving complex problems.
Though rivals exist, Nvidia has remained in the lead -- the company has kept its promise of innovating on an annual basis to ensure this position. Still, this isn't the only way Nvidia plans on staying ahead, and right now, in the last days of 2025, the tech giant made a game-changing move -- one that could help secure its leadership in the next phase of AI growth. Let's find out more.
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From gaming to AI
First, though, let's take a quick look at Nvidia's path so far. The AI giant actually started out about 30 years ago with a focus on serving the video game industry. Nvidia still does this, but a decade ago, the company recognized the AI opportunity and put its focus there. As a result, Nvidia developed the world's most sought-after AI chips as well as a full menu of related products -- from enterprise software to networking tools.
But the star of the show continues to be the GPU, and the biggest tech names, from Microsoft to Amazon, flock to Nvidia for each new release. This momentum has fueled explosive earnings growth for the chip designer, with revenue and net income climbing in the double and triple digits to record levels. In the most recent fiscal year, Nvidia's revenue reached more than $130 billion.
Now, let's move along to Nvidia's game-changing move. It's key because it not only addresses the risk of competition, but it also strengthens Nvidia's position in what may next drive AI growth: AI inferencing. We'll start with competition. Nvidia faces it from market heavyweights like Advanced Micro Devices and even some of its own customers that are developing their own AI chips, such as Amazon. But Nvidia's biggest threat may not come from these giants. Instead, it may come from small start-ups specializing in technology that could either compete with or replace Nvidia chips -- particularly if these start-ups specialize in the area of AI inferencing.
NASDAQ: NVDA
Key Data Points
The importance of inferencing
Before I go any further, I'll explain the importance of inferencing. It's the powering of the "thinking" AI models go through to do their job. So even after they're trained, they will need GPUs (or another similar tool) to fuel that process. The AI inferencing market, worth about $103 billion today, may reach $255 billion by 2032, according to Fortune Business Insights.
Nvidia has said repeatedly that inferencing is the next major area of growth in this AI boom and has specifically designed its latest architecture, Blackwell, for inferencing strength.
But Nvidia isn't stopping there, and instead made this exciting move: The company is acquiring inferencing technology from start-up Groq for $20 billion in cash, according to CNBC. This represents Nvidia's largest deal ever. CNBC reported that in an email to employees, Nvidia chief Jensen Huang said: "We plan to integrate Groq's low-latency processors into the Nvidia AI factory architecture, extending the platform to serve an even broader range of AI inference and real-time workloads."
Nvidia's financial strength
Nvidia, with $60 billion in cash as of the end of the latest quarter, has the financial strength for this deal and potentially others. And, importantly, it shows that Nvidia is ready to invest in the developments of smaller rivals to reinforce its own platform -- this, along with the company's own commitment to innovation, is a surefire way to stay ahead of the crowd.
The Groq deal is particularly attractive because it involves inferencing, an area that could supercharge Nvidia's growth in the years to come. And the addition of Groq executives to the Nvidia team should facilitate the integration of this new technology with Nvidia's. Groq's chief executive officer, the company president, and other executives will join Nvidia as part of the deal to "help advance and scale the licensed technology," according to a Groq blog post.
All of this is great news for Nvidia investors as we head toward a new year -- and a new phase of AI growth driven by inferencing.
