What to know about Hugging Face, the open-source AI startup reportedly catching Nvidia's eye

By Emily Bary and Britney Nguyen

New reports outline deal talks between the two companies as open-source AI technology comes more into focus

Hugging Face, which was co-founded by Thomas Wolf, was valued at $4.5 billion in a 2023 funding round.

As open-source artificial intelligence gains momentum, Nvidia may be making a sizable acquisition.

The Information reported late Wednesday that the company had struck a $12.9 billion deal to acquire Hugging Face, a repository for open-source AI tools. Business Insider reported earlier in the evening that the parties had been holding talks over a deal that could value Hugging Face at more than $13 billion.

Nvidia (NVDA) and Hugging Face didn't immediately respond to requests from MarketWatch for comment.

Open-source AI refers to models that can be freely used and modified - unlike closed-source AI, which is designed to be controlled and private.

"The world will need both closed models and open models," Nvidia CEO Jensen Huang noted on the company's Wednesday earnings call. "And both closed models and open models are skyrocketing in use."

Huang added that "nearly all open models run on Nvidia."

Hugging Face positions itself as a platform for AI developers. The company says it provides easy access to the sorts of tools that AI builders need to create their own AI applications and to collaborate with others in the technology world. Hugging Face houses open-source models, data sets and applications.

While users can browse, download content and conduct other activities for free on the Hugging Face platform, the company also offers a subscription product that it says lets people "explore the entire spectrum of AI, covering text, image, video, audio, 3D and more." The Pro subscription also affords access to greater computing power, or "up to 40 minutes of RTX Pro 6000 Blackwell," which is a reference to a type of Nvidia hardware.

The company said most of its employees work remotely. It also has offices in Brooklyn and Paris.

Open-source AI is heating up as developers look for more cost-efficient ways to build with AI. By publishing things like model weights, open-source players make it so others can easily build on what they have created.

"Increasingly the world is running on open and local models because they're more affordable than the big APIs and private by design," Hugging Face CEO Clément Delangue said in a July press release, referring to application programming interfaces.

Delangue said on CNBC earlier this month that he thought China was already beating the U.S. when it came to open-weight models, which publish weights but not training data or some other aspects of the models. He argued that U.S. companies have been "building in silos" while Chinese players have been more open to collaboration.

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Hugging Face gained attention earlier this summer when OpenAI models breached controls and were able to compromise the company's systems. This offered a glimpse of the potential for AI models to go rogue, as the ones being tested were meant to be isolated from the internet.

Through a 2023 funding round, Hugging Face fetched a private-market valuation of $4.5 billion.

Stifel analyst Ruben Roy said if the reports of a deal with Nvidia are confirmed, the acquisition "would be a natural extension" of Nvidia's strategy with its Nemotron family of open-source AI models, details of which are already available on Hugging Face. The Nemotron family is focused on powering autonomous AI agents.

Having ownership over Hugging Face "could convert a distribution channel that [Nvidia] currently does not own into one that can be controlled," Roy said in a note to clients.

That would ultimately push AI infrastructure deployments toward Nvidia's CUDA software architecture, Ruben said, as developers find and choose its models for use.

-Emily Bary -Britney Nguyen

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08-27-26 1048ET