Nvidia will acquire developer platform Hugging Face for $12.93 billion, according to the announcement on Thursday. The deal represents one of Nvidia’s largest acquisitions and strengthens its position in the rapidly expanding open artificial intelligence market.

Nvidia shares rose about 1.5% after the announcement. The company is betting that demand for open AI models will continue to grow, even as major customers develop their own chips to reduce reliance on Nvidia.

Hugging Face has become a major platform for developers who build, test and share AI models and software. Unlike closed systems from companies such as OpenAI and Anthropic, many models hosted on the platform can be downloaded, customized and deployed by users.

Nvidia Expands Its Open AI Strategy

The acquisition gives Nvidia direct access to a platform used by developers across the open AI ecosystem.

Nvidia already supports the sector through its Nemotron family of AI models. Furthermore, the two companies have worked together to help developers access Nvidia computing services through Hugging Face.

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Nvidia CEO Jensen Huang said Hugging Face would remain an open platform for the wider AI ecosystem. He also said Nvidia chips would not be mandatory for building or deploying technology through the platform.

The deal could provide Nvidia with deeper insight into how developers use open models. Consequently, the company could strengthen its position as competition intensifies among US and Chinese AI developers.

Open Models Gain Momentum

Demand for open-weight AI models has increased as businesses look for less expensive ways to deploy advanced technology.

Chinese companies such as DeepSeek and Z.ai have emerged as important players in the market. Their models have demonstrated strong performance in areas such as computer coding while offering lower deployment costs.

That growth has also raised concerns in Washington. US companies could become increasingly dependent on Chinese AI models as both countries compete for leadership in artificial intelligence.

For Nvidia, supporting open AI could therefore provide a strategic hedge. Major customers, including Meta, OpenAI and Microsoft, are developing their own processors to reduce dependence on Nvidia’s expensive and supply-constrained chips.

Nvidia Offers $1 Billion Employee Retention Plan

Under the proposed transaction, Nvidia will pay approximately $11.9 billion to Hugging Face investors.

The deal also includes an equity-based retention programme worth up to $1 billion for Hugging Face employees who join Nvidia.

Hugging Face was valued at about $4.5 billion in August 2023 after raising $235 million from investors including Salesforce, AMD and Amazon.

Meanwhile, Nvidia ended its July quarter with $22.44 billion in cash and cash equivalents. That figure was more than double its $10.61 billion balance in January.

The strong balance sheet gives Nvidia substantial capacity to finance major investments. However, its aggressive use of capital has also attracted investor scrutiny.

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Nvidia recently issued an unusual year-ahead forecast, projecting roughly 70% revenue growth in fiscal 2028 as demand for AI infrastructure continues to expand.

At the same time, some investors have questioned whether Nvidia is helping create the demand behind its own growth.

The company has agreed to guarantee up to $105 billion related to an OpenAI data-centre lease in Ohio. Such commitments have increased scrutiny of Nvidia’s strategy and its exposure to the broader AI investment cycle.

Hugging Face also offers more than model hosting. Its platform includes datasets, software libraries and cloud services that developers use to build and deploy AI applications.

The New York-based startup was founded in 2016 by French entrepreneurs Clément Delangue, Julien Chaumond and Thomas Wolf.

If completed, the acquisition will give Nvidia a much stronger foothold across the software and developer side of the AI industry, complementing its dominant position in AI computing hardware.