Two former Groq engineers filed a Delaware lawsuit on October 2, challenging Nvidia’s $20 billion licensing-and-hiring deal with the AI chip startup. The complaint alleges the transaction improperly bypassed required stockholder votes and left common shareholders shortchanged while insiders secured lucrative payouts.
When Nvidia struck its multibillion-dollar arrangement with artificial intelligence chip designer Groq in December 2025, the transaction broke conventional Silicon Valley acquisition molds. Rather than executing a standard corporate buyout, the companies structured the deal as a non-exclusive technology license paired with a massive talent transfer.
For Nvidia, the transaction brought in a large team of experienced chip engineers along with Groq’s founder and president. In an email to employees from around the time the deal was announced, Nvidia CEO Jensen Huang wrote that the agreement would expand Nvidia’s capabilities by integrating low-latency processors into the Nvidia AI factory architecture. Groq has raised around $1 billion since June, from investors including Nvidia, and later joined a funding round that valued the remaining Groq at $3.5 billion.
Huang noted that while the company was adding talented employees and licensing intellectual property, Nvidia was not acquiring Groq as a company. That unusual architecture has now triggered legal fallout.
Distributing Proceeds From the $20 Billion Deal
At the center of the Delaware litigation lies a dispute over how the approximately $20 billion total was divided among stakeholders. An additional $3 billion Nvidia stock bonus pool of restricted stock units was set aside for certain engineers who joined the company, including Groq founder and board member Jonathan Ross, a former Google executive.
Lawyers for the engineers argued that top Groq employees were permitted to take a discount on their shares and receive separate compensation for following the technology to Nvidia. Mid-2025, Groq had raised $750 million at a $6.9 billion valuation, making the subsequent $20 billion headline figure a massive leap that plaintiffs say obscured an uneven distribution of funds.
Facing Fiduciary Breaches in Delaware Chancery Court
The legal complaint, docketed as case 2026-1291, accuses Groq’s board of directors of flagrant breaches of fiduciary duty that cost Groq’s stockholders billions of dollars. The lawsuit states that a board majority was conflicted, and that the board sold the company to Nvidia without the stockholder vote Delaware law requires and without any process designed to test or maximize the value of what Nvidia bought.
The plaintiffs emphasize that new, innovative transactions are still governed by Delaware law and that new structures must comply with the law just like old ones.
“New, innovative transactions are still governed by Delaware law. New structures must comply with the law, just like old ones. Fortunately, drawing the line is easy in this case.”
Lawsuit text, via Bloomberg Law
Justice Department Investigates Nvidia Antitrust Concerns
The Delaware stockholder litigation arrives alongside separate regulatory pressure. In September 2026, the US Department of Justice opened an antitrust investigation into the transaction to examine whether the arrangement bypassed premerger notification requirements under the Hart-Scott-Rodino law. The transactions also include Nvidia’s $13 billion deal for AI startup Hugging Face, which was announced last month as part of efforts to grow and shore up its dominant global position in the market for AI chips and related technology.
Neither Nvidia nor the investment funds are named as defendants in the Chancery Court action. Groq has forcefully rejected the allegations, maintaining that the transaction successfully fulfilled its commercial purpose and benefited all participants.
“Our licensing agreement with NVIDIA delivered exceptional value for Groq, our investors, and our employees. This lawsuit is meritless and we will vigorously defend ourselves against it. We remain focused on serving our customers and building the world’s leading AI inference cloud.”
Groq spokesperson, via CNBC
The company has not provided further details regarding the specific legal strategy it intends to employ as the court proceedings move forward in Delaware Chancery Court under case 2026-1291.