NVIDIA NVDA has confirmed its plan to acquire Hugging Face, a New York-based startup known for its open-source artificial intelligence (AI) model repository. The deal, valued at $12.9 billion, represents NVIDIA’s second-largest acquisition after its $20 billion purchase of chipmaker Groq’s assets, as quoted on CNBC.
The acquisition price underscores the strategic value of Hugging Face as the AI industry continues to expand.
Why Hugging Face Matters
Hugging Face has emerged as a major platform for developing, sharing and running AI models, particularly open-weight models that developers can modify and host themselves.
According to Huang, roughly half of NVIDIA’s business is driven by open models. NVIDIA is also a major developer of open AI models, making Hugging Face a natural fit with its broader AI strategy.
Beyond open-source AI, Hugging Face provides infrastructure and collaboration tools for organizations developing proprietary AI systems. The platform has more than 18 million users, hosts over 3 million models and 500,000 datasets, and is used by more than 200,000 companies, according to NVIDIA, as quoted on CNBC.
NVIDIA Gains Greater AI Visibility
The acquisition could also give NVIDIA deeper insight into how AI developers and customers are using the technology.
Forrester analyst Naveen Chhabra said NVIDIA could gain visibility into which AI models are gaining popularity, what datasets developers are accessing and which architectures are attracting interest before broader market trends emerge, per the same CNBC article.
NVIDIA has lately positioned itself beyond its traditional role as a chipmaker by investing in companies across the AI value chain and helping fund GPU purchases through increasingly sophisticated arrangements.
AI Supply Chain Faces New Risks
Hugging Face CEO Clément Delangue told CNBC recently that China is winning the AI race with open-weight models. He expects Chinese tools to catch up to the U.S. frontier labs by the end of 2026 or in 2027.
Meanwhile, the accelerating U.S.-China AI race is drawing greater attention to America's dependence on China for certain components used in AI data centers.
Growing scrutiny of these supply chains could raise costs, creating further challenges for the massive infrastructure buildout needed to support AI growth. Hence, focusing on open-source AI models and their acquisition could prove to be a lucrative investment opportunity.
Are Open-Source Models Better for Cybersecurity?
Delangue, a strong advocate of open-source AI, sees open models playing a key role in the growing AI cybersecurity market, as quoted on CNBC. Their flexibility, transparency and ability to run within private environments make them useful for detecting evolving threats while keeping sensitive data under organizational control.
Against this backdrop, NVIDIA's recent investment in Hugging Face appears well aligned with the growing demand for open-source models.
ETFs to Win
Below we highlight a few NVIDIA-heavy ETFs that should be in focus now.
VanEck Fabless Semiconductor ETF SMHX – Weight 24.10%
VanEck Semiconductor ETF SMH – Weight 23.45%
Strive U.S. Semiconductor ETF SHOC – Weight 23.18%
Global X PureCap MSCI Information Technology ETF GXPT – Weight 20.87%
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NVIDIA Corporation (NVDA): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).