Nvidia is said to be in negotiations to acquire Hugging Face for $12.9 billion.

      Nvidia is reportedly in discussions to acquire Hugging Face, valued at over $13 billion, as per Business Insider. This comes shortly after news that the open-model hub was considering a sale at a similar valuation. The Information suggests that the negotiations are further along, indicating an agreed amount of $12.9 billion, but Nvidia did not respond to a request for comment.

      Business Insider notes that, as of now, these discussions have not led to a final agreement and may still collapse, while The Information claims a deal has already been reached. Neither company has verified either claim. The lack of a statement from Nvidia is drawing significant attention; the company has previously acted swiftly to dismiss reports it finds inaccurate, and it has remained silent on this matter.

      What adds intrigue to the situation is that Hugging Face has previously declined Nvidia's interest, turning down a $500 million investment that would have valued it at $7 billion. The company believed it was inappropriate for a single investor to exert such influence over what is intended to be neutral infrastructure.

      This objection stemmed from governance concerns rather than price negotiations. Hugging Face argued that the repository for everyone’s models should not be dependent on a company that sells hardware to them. The valuation has significantly increased since it secured $4.5 billion in post-money from its 2023 funding round, which Salesforce Ventures led, alongside Alphabet, GV, and IBM Ventures.

      CEO Clem Delangue mentioned earlier this year that the company was nearing profitability and had recently started to utilize funds raised three years ago. Based on reported revenues, the suggested purchase price is notable: The Information estimates Hugging Face's annual revenue at about $150 million, a rise from roughly $100 million just two months ago, implying a valuation of around 86 times sales at $12.9 billion.

      Delangue has also been clear about not steering the company toward a sale, stating that Hugging Face prioritizes “long-term sustainability” over “short-term profits or fundraising maximization.” Selling to Nvidia would contradict this stance, prompting a cautious approach to the recent reports.

      For Nvidia, the rationale centers on distribution rather than revenue. Hugging Face provides the model weights, datasets, and tools essential to the majority of the open-source AI community. Owning the repository where these models are stored holds more value than the associated subscription revenue.

      This potential acquisition aligns with Nvidia's broader strategy, which has already crossed $40 billion in AI equity investments this year, including acquisitions like Kumo in June. In its latest quarter, Nvidia reported net gains of $7.77 billion from equity securities, indicating that this strategy is currently self-sustaining.

      However, the question of neutrality persists, despite Hugging Face reconsidering its buyer. Throughout the year, Nvidia has positioned itself as a supporter of open models, having signed an open-weights letter that OpenAI chose not to join. A repository owned outright by Nvidia represents a different scenario compared to one that it merely endorses.

      Delangue has also been emphasizing that open models are the focal point of competition, noting that Chinese labs are gaining advantage in this area. The ownership of the key distribution platform for these models by an American chipmaker is likely to capture the interest of regulators in various jurisdictions.

      Antitrust issues could complicate the acquisition, although this concern has not been publicly voiced yet. Nvidia is already under scrutiny regarding its role in AI accelerators, and acquiring the ecosystem's primary hosting provider is the kind of vertical integration that regulatory bodies tend to monitor closely.

      Additionally, there is uncertainty regarding the community's future if the ownership changes. Much of Hugging Face's value arises from researchers voluntarily contributing weights to a platform perceived as independent from any single vendor.

      As of now, we only have reports, with no confirmation from either party involved.