Is Nvidia Paying $12.9 Billion for Hugging Face? (Photo by Patrick T. Fallon / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images)AFP via Getty ImagesNvidia has agreed to buy Hugging Face for $12.9 billion, according to The Information and most useful question for business leaders is not what Nvidia will do with it. Business Insider reports that no agreement has been signed and the talks could still fall apart. Neither company has commented, which is significant as Nvidia typically knocks down reports that it considers wrong. If it does close, which will be the second of its kind this month, the quesion is what it tells business leaders about the platforms your own AI strategy depends upon. Nvidia’s Deal. What is Hugging Face Anyway? If you have never used it, here it the simple version. When a company like Meta or Mistral releases an open source AI model, meaning a model anyone can download, inspect or run on their own computers, that model has to live somewhere. Hugging Face is that place those models live. Hugging Face is like the public library of the AI world. Developers can check out models instead of books. (Photo by Jaque Silva/NurPhoto via Getty Images)NurPhoto via Getty ImagesHugging Face hosts open source models along with the benchmark evaluations and datasets used for training and testing. Think of it like a public library of the AI world. Developers can check out models instead of books and because Hugging Face never favored one chipmaker or cloud, everyone trusted the library. And that trust is valuable at this stage of AI. It’s worth noting that Cursor launched Origin, a rival code host, on the same day GitHub went down for seven hour. GitHub and Origin are where developers store and share code; Hugging Face is where they store and share AI modelsNvidia’s $12.9 Billion Hugging Face MathHugging Face brings in roughly $150 million a year in revenue, so Nvidia is paying about 86 times revenue. No one pays that multiple for the revenue. Nvidia’s chip dominance is under pressure as OpenAI, Google, Amazon and Anthropic build their own silicon and developers who download open models still need hardware to run them, which usually means Nvidia GPUs. Owning the front door to open source AI keeps demand flowing to Nvidia even as its biggest customers work on leaving. Hugging Face turn down a $500 million investment from Nvidia last year at a $7 billion valuation, reportedly because it didn’t want a single dominant investor. Nvidia came back with a nearly double the valuation and a full purchase price instead. Much of the industry conversation this week centers on whether Nvidia will keep the platform hardware neutral. Analysts are split right now, warning that an important neutral marketplace cold gradually because an Nvidia distribution channel. It is a fair debate. Hugging Face, Nvidia, And the Disappearing Middle LayerWhen Stripe bought OpenRouter for more than $7 billion earlier this month, I wrote that the real story was infrastructure consolition. Hugging Face is the next domino. The AI economy grew up on a set of neutral middle layers like model repositories, API routers, payment rails and data marketplaces. They were valuable because they belonged to no one’s ecosystem. In the span of two weeks, two of the biggest have been claimed by giants. Neutrality maybe a stage companies pass through, not a permanent condition. What Could This Nvidia Deal Mean For Your CompanyFrom what is happening around AI and the AI dependencies you may have, here are three questions you should discuss at your next leadership meeting or board meeting. 1. Where do our teams get their models and who owns that platform today? 2. If that platform was purchased by a non neutral player, what happens to our costs and our data. 3. Do our contracts include portability terms so that we can export models and workflows without penalty? Most companies should not wait until an acquisition headline comes along. The smartest response to this potential Nvidia deal is a dependency map of your own stack.