According to The Information, $NVIDIA (NVDA.US)$ Planned acquisition of the Seattle-based startup OctoAI is currently in advanced negotiations.

OctoAI primarily sells software aimed at improving the efficiency of running AI models. According to a letter sent to shareholders, Nvidia intends to enhance its software and cloud computing service capabilities through this acquisition. Based on documents sent by OctoAI to shareholders, Nvidia proposed to acquire the company for approximately 0.165 billion US dollars, but this does not yet take into account the company's debts and other expenses.

Analysis suggests that this offer may not provide substantial returns to OctoAI shareholders, especially employees. According to the merger documents, common stock shareholders can only receive two cents per share; former employees who exercised vested options at a higher price upon departure may incur losses. OctoAI has raised 0.132 billion US dollars from investors, including Tiger Global Management, Madrona Venture Group, and Amplify Partners, with a valuation of around 0.9 billion US dollars in 2021.

According to reports, OctoAI was founded five years ago, originally named OctoML, and was founded by the creator of the open-source project Apache TVM at the University of Washington in 2019. Initially, the company focused on helping developers deploy machine learning models, but last year it shifted to selling a service that allows developers to quickly optimize open-source or custom AI models, regardless of the type of chip used by the models.

The company states that their main focus is addressing a key challenge in developing AI applications: how to make machine learning models perform well on different types of processors. OctoAI's approach involves converting models into code that can be processed by different processors. The company claims that its software helps launch machine learning applications faster, reduces the computational costs of running these models, and outperforms custom software developed by chip manufacturers. According to a source cited by the media, OctoAI achieved revenues in the millions of US dollars last year.

Recently, Nvidia has acquired a series of small AI and cloud computing startups, including the acquisition of two small Israeli startups, Run and Deci, at the beginning of the year. The goal is to lower the cost and make it more convenient for developers to run AI models using Nvidia chips, as the industry generally believes that Nvidia chips are expensive and in high demand, making it difficult for companies to run AI on a large scale at a reasonable price.

Earlier this year, Nvidia and OctoAI announced a partnership related to their services. The two companies have previously collaborated closely, with Nvidia providing OctoAI with its latest chips in advance for testing how efficient AI models can run on these chips. This year, Nvidia launched a software product called Nvidia Inference Microservices to address some of the issues that OctoAI focuses on.

However, OctoAI also has close partnerships with Nvidia's competitors, such as Amazon Web Services, AMD, and Qualcomm, which help developers use their AI chips. Therefore, analysts believe that after Nvidia completes the acquisition of OctoAI, it will face scrutiny from the US Department of Justice, which is also investigating Nvidia's other acquisition activities.

Nvidia's stock price fell 0.8% to $114.67 on Wednesday. The stock has gained nearly 140% so far this year.

Editor/Somer