Two former shareholding engineers for Groq have filed a lawsuit against semiconductor giant Nvidia’s $20 billion deal to license its technology, arguing the board acted improperly, according to the Financial Times.

The complaint, filed in a Delaware court last Friday, alleges that Groq’s board improperly sold the company’s core assets and top employees to Nvidia, leaving the remaining staff with the shell of a businesses.

When the deal was announced in December of last year, it was framed as a “non-exclusive” licensing deal that would maintain Groq as an independent manufacturer of AI-focused chips.

However, according to the lawsuit, Groq’s board faced conflicts of interest and did not observe its legal obligation to get the best price and structure for shareholders from any deal.

The FT reported that lawyers for the plaintiffs Benjamin Serebrin and Joshua Rubin, wrote that the deal: “Took billions of dollars in benefits for itself, senior management, and affiliated funds that it did not share with Groq’s other stockholders”.

Nvidia declined to comment to the paper.

Groq told the FT that its licensing agreement with Nvidia “delivered exceptional value for Groq,” adding: “This lawsuit is meritless and we will vigorously defend ourselves against it. We remain focused on serving our customers and building the world’s leading AI inference cloud.”

The $20 billion agreement included a $17 billion portion which was shared among all backers and a separate $3 billion Nvidia stock bonus pool, which went to engineers who joined Nvidia, including Groq’s founder and board member Jonathan Ross.

According to the FT, the lawsuit alleges that common stock was sold at a discount while those who joined Nvidia were able to “take a discount on those shares and be paid separately for following the technology to Nvidia.”

The deal’s December announcement said that top executives, including Ross, would join Nvidia alongside the licensing agreement. The lawsuit claims that the deal in fact hired “nearly all” of Groq’s engineers, the paper said, totalling nearly 200.

In September, the New York Times reported that the deal between Groq and Nvidia was under investigation by the US Department of Justice as to whether it was structured to avoid antitrust review.

The deal is the latest in a series of major investments by Nivida in recent months, including its purchase of open-source AI platform Hugging Face for $12.9 billion in August and its $6 billion deal with open-weight AI developer Poolside the week before.

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