On Christmas Eve last year, Nvidia made headlines with an unusual $20 billion deal involving AI chip startup Groq. On paper, Nvidia did not acquire Groq outright. Instead, it inked a “non-exclusive licensing agreement” for Groq’s technology and hired away the company’s top talent, leaving behind a legally independent husk.
Like similar recent deals by Microsoft, Amazon, and Google, Nvidia’s maneuver was designed to bypass the federal merger review process — and the delays and scrutiny that come with it. Often called a “reverse acqui-hire,” these arrangements let dominant firms quietly neutralize emerging competitors. The result is a growing consolidation of power in tech — and a challenge for antitrust enforcers trying to preserve competition in fast-moving markets like AI.
Simply put, a reverse acqui-hire is an acquisition in substance but not in form. In a traditional corporate acquisition, one company outright purchases part of or an entire target company, including its product and staff. But in a reverse acqui-hire, the bigger fish pays for access to valuable talent and intellectual property without taking any ownership of the smaller business itself.
Crucially, by structuring the arrangement as a licensing-and-hiring deal, the companies argue that there is no “merger” to report to the government. Under the Hart-Scott-Rodino Act, firms must alert the Federal Trade Commission and Department of Justice about any large acquisition (roughly $134 million as of 2026). Companies recognize that acquiring even a complementary startup could trigger a lengthy review or risk outright rejection. Reverse acqui-hires offer a workaround — enabling firms to consolidate talent and technology without opening the deal to formal regulatory challenge.
In the Nvidia–Groq case, Groq founder Jonathan Ross, President Sunny Madra, and roughly 80% of the engineering team reportedly moved to Nvidia. The $20 billion payment, ostensibly for a tech license, is “really a means to pay off its VCs,” legal scholars from Vanderbilt Law School and the Cardozo School of Law note. Groq’s expertise lies in building AI chips that speed up the performance of AI applications, albeit on a smaller scale than Nvidia’s GPUs. This deal gives Nvidia an edge in this fast-growing segment of the AI chip industry without acquiring Groq outright.
The startup’s remaining shell — whatever is left of the team and operations — remains legally independent. But without its core technical team, Groq may lack the capacity to innovate, scale, or commercialize its technology in ways that would meaningfully compete with Nvidia or others in the market.
The upside of a reverse acqui-hire may be appealing for firms looking to move fast, but the broader consequences for competition are troubling. Reverse acqui-hires have prompted concerns that these deals undermine innovation and market dynamism in ways similar to – or potentially more quietly than – traditional acquisitions. While some of these transactions may involve complementary technologies or vertical integration, the outcome can still reduce the number of firms operating independently in emerging markets. For example, after Microsoft hired most of Inflection AI’s team, the startup pivoted from developing consumer-facing products to licensing its models to enterprises. In other cases, the remaining company may eventually exit the market altogether. Even when these firms are not direct competitors, the loss of potential challengers or collaborators can shift market dynamics in favor of incumbents. With fewer capable rivals in the ecosystem, dominant firms may face less pressure to innovate, and may gain greater leverage over business customers and end users.
These dynamics also affect the startup pipeline that feeds innovation. A major goal for many startups is to be acquired, and reverse acqui-hires can still deliver strong outcomes for founders and early investors. But they may diminish incentives for broader participation. Rank-and-file employees may see limited upside, especially if they are not brought into the acquiring firm or if their equity in the stripped-down startup becomes worthless. Over time, this may make it harder for startups to attract and retain the kind of talent needed to scale independently. If fewer founders pursue long-term growth and fewer teams aim to build sustainable competitors, markets may become less dynamic — even if capital and ideas remain abundant.
The good news is that, according to legal scholars, existing U.S. merger law contains tools to police reverse-acquihires and address some of these risks. The HSR Act’s anti‑evasion rule directs regulators to disregard any transaction “for the purpose of avoiding” the filing requirements and to assess it on its substance.
There are early signs that regulators are beginning to test these boundaries. The DOJ’s current probe of Google’s Character.AI deal shows it is examining whether a reverse acqui-hire was used to sidestep review. And authorities abroad are watching too: the U.K. CMA has opened a similar inquiry into Microsoft’s Inflection AI talent deal. How the FTC and DOJ apply HSR’s anti‑evasion provision in those cases will be crucial in determining whether reverse acqui-hires remain a viable backdoor to consolidation or fall under standard merger review.
