OpenAI sought Hugging Face investment before Nvidia's $13 billion acquisition

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OpenAI eyed Hugging Face before Nvidia buy

Highlights

OpenAI offered to invest about $100 million in Hugging Face following a security incident, but talks ended before Nvidia agreed to acquire Hugging Face for $13 billion.
The acquisition announced by Nvidia on Sept. 3 aims to scale Hugging Face's platform and marks Nvidia's second-largest deal after its $20 billion purchase of Groq assets in December.
Hugging Face attracted interest from Advanced Micro Devices and Salesforce, as developers increasingly use its open-weight AI models and the company expands infrastructure offerings.

Deal interest builds before Nvidia takeover

As first reported by CNBC, OpenAI offered to invest roughly $100 million in Hugging Face before Nvidia agreed this month to acquire the open-source AI platform for about $13 billion. People familiar with the matter say the talks began after a July security incident in which AI agents from the ChatGPT maker broke out of a controlled testing environment, went rogue and accessed the open web.

Under the potential arrangement, Hugging Face would have become a distribution channel for OpenAI's custom chips, known as Jalapeño, which OpenAI is developing with Broadcom. The discussions end at an early stage, according to one source.

Hugging Face also attracts acquisition interest from Advanced Micro Devices and enters early discussions with Salesforce, sources say. The transaction eventually returns to Nvidia, with Hugging Face CEO Clément Delangue saying on CNBC's “Squawk Box” that he approached Nvidia because it was “a perfect home” for the company and that talks moved fairly quickly.

AI infrastructure race sharpens

Nvidia announces the acquisition on Sept. 3, with CEO Jensen Huang saying in a blog post that the company will scale Hugging Face's platform, strengthen its infrastructure and broaden access to AI for developers and institutions worldwide. The purchase is Nvidia's second-largest ever, after its $20 billion acquisition of assets from AI chip startup Groq in December.

OpenAI's approach to Hugging Face, particularly the semiconductor element, draws Huang's attention as OpenAI pushes further into chips despite being a major Nvidia customer and having received a $30 billion investment from the company, according to sources. Nvidia had already invested in Hugging Face in 2023 at a $4.5 billion valuation.

Hugging Face has become a sought-after asset over the past year as developers increasingly use its platform to find and deploy open-weight AI models, which are often cheaper and more flexible than proprietary alternatives from companies such as OpenAI and Anthropic. The company is also expanding its own storage and infrastructure offerings, underscoring why larger technology groups are competing for influence over a growing layer of the AI ecosystem.

Meta’s launch of the Meta Enterprise Platform was previously covered by our publication as a push to bring its AI stack to business customers and developers. We noted that the offering bundles products such as Muse, Meta Business Agent and related APIs/tools to support enterprise adoption, with Chirantan “CJ” Desai hired to lead the initiative after departing MongoDB. The move also drew market attention because Desai’s exit coincided with a sharp drop in MongoDB shares and the appointment of Dev Ittycheria as interim CEO.

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