Nvidia’s Hugging Face Deal Is a Hedge against Broadcom’s Custom Silicon Threat

NVIDIA Corporation (NASDAQ: NVDA ) has officially committed billions on AI developer platform Hugging Face for a $12.9 billion. The deal signifies the chipmaker's move beyond hardware and up the AI stack.

The AI chipmaker buying the open-source model hub millions of developers are already using reads differently when compared to Broadcom's earlier forecast to double its AI chip revenue to roughly $230 billion in fiscal 2028.

Even though AVGO is facing increased competition in Google's TPU programs, it is also gaining ground with customers such as OpenAI and Anthropic. This makes Nvidia's recent move look more like insurance rather than opportunism.

In response to the acquisition, Needham analyst Rajvindra Gill reiterated a Buy rating on Nvidia on September 4, assigning a $300.00 price target.

"Yesterday, NVIDIA announced its agreement to buy Hugging Face for $12.930BN. Hugging Face is the open source platform for hosting open source and open weight models and datasets enabling developers to easily access ready-to-use models instead of building and training them from scratch."

Nvidia's $12.9 billion deal would give it a platform that is home to more than 18 million developers, researchers and creators. This platform hosts more than 3 million models, 500,000 datasets, and 1 million applications. Hugging Face is Nvidia's way of remaining central in the AI theme.

Reuters BreakingViews calls the deal Nvidia's strategic insurance policy that helps it protect market share against custom chips built by major tech clients. Regardless of which chip trains or serves a model, Hugging Face gives Nvidia a major touchpoint with developers higher up the AI stack. That is a layer of the ecosystem that gives the AI chipmaker a degree of independence.

The bear case, however, is that even though the chip giant has just agreed to spend billions on the "Switzerland of AI," Nvidia CEO Jensen Huang has committed to hardware neutrality.

" Hugging Face will remain an open platform for the entire AI ecosystem. Developers will choose the models they want, the frameworks they want, the clouds and inference service providers they want, and the computing platforms they want. Nvidia Compute will not be required to build on or deploy through Hugging Face."

This makes Nvidia both strategically and publicly pressured to keep Hugging Face open to AMD and other rivals.

Some of Nvidia's customers already hold strong incentives to reduce their reliance on expensive GPUs that it provides, with the deal strengthening its position but not completely eliminating the custom-silicon threat.