Artificial intelligence startup Groq Inc. has successfully raised $640 million in funding, underscoring the robust investor interest in AI chip innovation.

This funding round has boosted Groq's valuation to $2.8 billion, positioning it as a formidable competitor to Nvidia, which currently dominates the AI chip market.

Groq's chips, known as Language Processing Units (LPUs), are marketed as being four times faster, five times cheaper, and three times more energy-efficient than Nvidia's GPUs for inference tasks.

Cloud service providers are increasingly seeking alternatives to Nvidia's processors due to the high demand and limited supply in the market.

The surge in demand for rapid inference capabilities was significantly influenced by the AI boom that began with OpenAI's ChatGPT in late 2022.

Groq has launched GroqCloud, which allows developers to rent access to its chips, and has already secured customers like Argonne National Labs and Aramco Digital.

Currently, over 360,000 developers are utilizing GroqCloud to create AI applications using models from Meta, OpenAI, Google, and Mistral.

Based in Mountain View, California, Groq focuses on designing semiconductors and software to enhance AI computing power, with applications in areas like patient coordination and real-time genomic processing.

To strengthen its position in the market, Groq has appointed Meta's chief AI scientist Yann LeCun as a technical advisor and former Intel executive Stuart Pann as its new COO.

Despite the competitive landscape, Groq aims to carve out a substantial market share, even if it represents only a small portion of Nvidia's overall business.

Groq gained significant visibility after launching a conversational chatbot that set speed records for LLM output on open-source models, showcasing its technological capabilities.