Nvidia’s $20 Billion Groq Deal Challenged by Former Engineers in Delaware Court

Former Groq engineers Joshua Rubin and Benjamin Serebrin filed a lawsuit against Groq’s board of directors on October 2, 2026, alleging that a $20 billion transaction with Nvidia was structured specifically to disenfranchise common stockholders. The complaint, filed in the Delaware Court of Chancery, claims the deal used a licensing “playbook” to bypass mandatory shareholder votes and regulatory oversight while “hollowing out” the startup’s core value.

The transaction, which was first announced on December 24, 2025, consists of a $17 billion fee for a non-exclusive license of Groq’s technology and $3 billion in Nvidia restricted stock units (RSUs) earmarked for employee retention. According to the lawsuit, this structure allowed Nvidia to effectively absorb the company’s human capital and intellectual property without executing a formal merger. Between 150 and 200 Groq engineers, including founder and CEO Jonathan Ross and President Sunny Madra, have already transitioned to Nvidia as part of the arrangement.

The plaintiffs characterize the $20 billion figure as a “lowball price” that “squeezed out” common stockholders who would have otherwise been entitled to a vote on a direct acquisition. While Nvidia and Groq have characterized the deal as a partnership and non-exclusive license, the litigation argues it functioned as a total asset sale in disguise.

Regulatory Scrutiny and the ‘Acqui-hire’ Strategy

The lawsuit arrives as federal regulators increase their focus on “acqui-hiring” practices in the artificial intelligence sector. In September 2026, the U.S. Department of Justice opened an antitrust probe into the Nvidia-Groq deal structure to determine if the licensing model was utilized to circumvent Hart-Scott-Rodino (HSR) Act merger reviews.

By utilizing a licensing agreement rather than a standard merger, companies can often avoid the lengthy cooling-off periods and disclosures required by the Federal Trade Commission (FTC) and the DOJ. The lawsuit alleges that Groq’s board favored the Nvidia deal over alternative paths that might have yielded higher returns for common shareholders.

The lawsuit alleges the deal functioned as an 'acqui-hire' to absorb 's workforce.

Valuation Shifts and Financial Impact

The “shortchanged” claim in the lawsuit is contextualized by Groq’s fluctuating valuation over the past year. In September 2025, Groq reached a peak private valuation of $6.9 billion. However, by August 2026, the company raised $350 million in a funding round that reset its valuation to $3.5 billion.

The shift in valuation highlights the friction between preferred and common shareholders. Former engineers allege that the $17 billion licensing fee—treated as income rather than merger proceeds—and the $3 billion in Nvidia stock awards primarily benefit the remaining entity and the transitioning executives, leaving common stockholders with diminished equity in a company that has lost its primary workforce.

As the Delaware Court of Chancery evaluates the filing, the case could set a legal precedent for how AI companies structure exits. If the court finds that a licensing deal of this magnitude constitutes a “de facto merger,” it may force a retroactive shareholder vote or mandate additional compensation for those allegedly sidelined by the $20 billion agreement.

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