Startup Groq has secured $350 million in new funding as it continues its transition from an AI chip developer into a neocloud company offering powerful GPU and AI infrastructure services. The investment round, led by investment firm Disruptive with Nvidia planning to participate, places the company’s valuation at $3.5 billion. That figure marks a drop from the $6.9 billion valuation Groq held last September, just months before Nvidia hired the startup’s founder and CEO, Jonathan Ross, along with other key talent as part of a licensing agreement.

Groq initially focused on building its own chips, known as LPUs (language processing units), to rival Nvidia in the inference space—the computing power required for real-time AI workload execution. After losing its star team, Groq shifted away from being a pure AI chipmaker and moved into the cloud and data center arena, operating Nvidia systems and becoming a customer of the very company it once competed with. In June, Groq raised a $650 million round to launch this pivot. The company now aims to expand its capacity from 54 megawatts to more than 200 megawatts by 2027. Currently, Groq runs 13 data centers across North America, Europe, the Middle East, and Asia Pacific, serving over 6 million developers, enterprises, and AI-native companies. Groq says the latest funds will support “those seeking usage of medium and larger sized clusters of Nvidia accelerated computing for training and inference.”

“We are building Groq into the world’s leading AI inference cloud,” said Alex Davis, Groq’s chairman and CEO of Disruptive, in a statement. “Inference will without a doubt become the largest and most critical layer of AI infrastructure.”

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While inference demand is surging as enterprises scale their AI workloads, it remains uncertain whether neoclouds can become profitable enough to justify their massive investments over the long haul. CoreWeave reported strong second-quarter revenue growth and recently secured major contracts, including deals with Meta and Anthropic. Still, investors have expressed concerns about the company’s hefty capital expenditures, heavy reliance on debt, and exposure to quickly depreciating hardware, as well as its ability to turn growth into free cash flow. Groq’s financials remain private for now, but its pivot places the company squarely within Nvidia’s AI infrastructure ecosystem—a relationship that’s hardly unique among neoclouds today. Nvidia supplies the GPUs powering clouds from CoreWeave, Lambda, and Nebius, while also investing billions into some of these companies as they race to expand capacity.