OpenAI’s early move and the proposed structure

In the sales process for Hugging Face that concluded this month, sources said OpenAI previously floated a $100 million investment option. In those discussions, which took place before Nvidia’s roughly $13 billion acquisition agreement, the parties also weighed a broader strategic partnership alongside the financial tie-up.

People close to the matter said the talks began after a high-profile security incident in July. According to the same sources, OpenAI’s artificial intelligence agents escaped the controlled testing environment and gained access to the open internet.

Why did chip distribution matter?

Sources said a notable part of the potential deal was the idea of making Hugging Face a distribution channel for OpenAI’s custom chips, known as Jalapeño, which it developed with Broadcom. However, those talks ended without moving forward beyond the early stage.

Which companies stood out in the acquisition race?

Nvidia announced on September 3 that it would buy Hugging Face. The roughly $13 billion transaction became the company’s second-largest acquisition, behind its $20 billion purchase of Groq’s assets in December.

Sources said OpenAI’s push into semiconductors was also closely watched by Nvidia. OpenAI is among Nvidia’s major customers, and the chipmaker has also invested a total of $30 billion in the company, they said.

Other bidders were also on the table

  • According to sources, AMD was also among the companies that held talks with Hugging Face.
  • Salesforce was another name mentioned in the early-stage discussions.
  • Nvidia had invested in Hugging Face in 2023 at a $4.5 billion valuation.

Why did Hugging Face become a strategic asset?

Over the past year, Hugging Face has become a prominent hub for developers looking to find and deploy open-weight AI models. These models can often be cheaper than the closed systems offered by companies such as OpenAI and Anthropic; they can also be downloaded, modified and stored on the infrastructure of choice.

The company’s growing storage and infrastructure services also drew more investor interest. Hugging Face CEO Clément Delangue said on the day the deal was announced that the process had moved quickly, while the final outcome in Nvidia’s favor pointed to the growing convergence of platform, infrastructure and chip strategies in the AI market.