Commentary: US$13 billion Hugging Face deal would crown Nvidia king of AI

Nvidia is bolstering its position in the artificial intelligence market by acquiring Hugging Face, a platform dedicated to open-weight AI models. This $13 billion deal, reported on the same day as Nvidia's doubling of quarterly revenue, is set to skyrocket the chipmaker's shares by 7%. Hugging Face, founded by French entrepreneurs, has long advocated for open-source AI development and hosts the world's largest collection of open-weight models.

However, the acquisition appears to be motivated by Nvidia's desire to prevent dominant AI companies like OpenAI from gaining too much influence over the industry. With a reported sales multiple of 86 times annualized revenue, Nvidia's investment in Hugging Face exceeds its previous rejections of a $500 million offer, driven by the startup's valuation and other potential acquirers.

The acquisition could give Nvidia greater control over developers and cloud ambitions, as well as a strategic position in AI, making it harder for competitors to challenge Nvidia's dominance.