alt Hacker NewsThis doesn't make much sense- In September, Groq was valued at $7B. How is it that in 4 months it is being bought for $20B?
Can someone with better understanding dumb this down for me please?
Replies
It only has to be overvalued by a lower multiple then NVidia; not undervalued.
Groq kept delivering so their valuation has effectively gone up.
A year ago it wasn't clear if they'd stay competitive but it seems they are.
It's an AI blackhole https://www.youtube.com/watch?v=21e5GZF3yx0
Imagine a pharma with a weight loss drug that isn't approved yet; it's either worth $20B (if approved) or zero (if not approved).
Now imagine the LPUv2 ASIC. If it works it's worth $20B and if it doesn't it's zero. If investors think LPUv2 has a 1/3 chance of success they would buy in at $7B. Then the chip boots up and... look at that.
Or it's just a massive bubble.
Trump Jr. entered at $7 billion. In the meantime Nvidia got permission to sell GPUs to China.
All-In pundit Palihapitiya is invested in Groq as well. It is going well for friends of David Sacks.
Acquisition premium: https://www.investopedia.com/terms/a/acquisitionpremium.asp
The acquisition price of a company usually comes at a premium to the last valuation. This applies even with publicly traded companies, which is why acquisition announcements cause stock prices to pop up to some number between the last trade price and the acquisition price, proportional to how much the market thinks the acquisition is likely to go through.
The premium can make sense to the acquirer because the acquired company is worth more when combined with all of the assets and power (brand name, distribution, patents, trade secrets) of the acquiring company.
This confuses a lot of people who think the valuation of a company is equivalent to the number that would be paid to acquire it at that instant, but it’s not.