Nvidia is in advanced negotiations to acquire Israeli artificial intelligence startup AI21 Labs, in a deal that could value the company at between $2 billion and $3 billion, according to people familiar with the matter cited by Calcalist.
If completed, the transaction would mark another major expansion of Nvidia’s footprint in Israel and underscore its growing focus on securing scarce AI talent as competition intensifies across the semiconductor and AI stack.
The proposed valuation would represent a sharp uplift from AI21’s last known valuation of about $1.4 billion, set during a 2023 fundraising round. Earlier this year, AI21 completed a roughly $300 million funding round led by Nvidia and Google, although the company did not formally confirm the raise or disclose its valuation. Market estimates at the time suggested the round did little to materially lift AI21’s valuation, reflecting mounting pressure in the generative AI sector.
The sources say talks with Nvidia have accelerated in recent weeks and reached senior decision-makers on both sides, after AI21 had spent an extended period “on the shelf,” with Google previously exploring a possible acquisition. Nvidia’s interest is said to be driven less by AI21’s products and more by its roughly 200-strong workforce, many of whom hold advanced academic degrees and possess deep expertise in large language models, reasoning systems, and foundational AI research.
At the implied price, the deal would value AI21’s staff at roughly $10 million to $15 million per employee, reinforcing the premium global technology firms are willing to pay for elite AI researchers. Industry observers say the structure resembles an acquihire, signaling a retreat from AI21’s original ambition to compete head-on with frontier model developers such as OpenAI and Anthropic, and instead folding its capabilities into a larger platform.
Founded in 2017 by Professor Amnon Shashua, Professor Yoav Shoham, and Ori Goshen, AI21 was once seen as a flagship effort to position Israel at the forefront of artificial intelligence, well before the generative AI boom that took off in 2022. Shoham, a leading Stanford AI researcher, and Goshen serve as co-CEOs, while Shashua is chairman.
Nvidia and Google first invested in AI21 during the 2023 fundraising round, which was later expanded amid the war in Israel.
Over the past two years, however, AI21 has struggled to keep pace with the explosive advances and capital scale of the sector’s leading players. In April, the company halted development of Wordtune, its long-running consumer-facing AI writing and reading assistant, effectively exiting the mass-market segment. Since then, AI21 has pivoted toward enterprise-focused language models, where precision, reliability, and lower error tolerance are critical.
Its flagship enterprise product, Maestro, is designed to improve language-model accuracy by as much as 50%, according to the company. AI21 has also rolled out a new reasoning model that it says delivers faster performance with lower memory consumption than rival systems. Even so, industry estimates put AI21’s annual revenue at around $50 million, a fraction of the multibillion-dollar revenues being generated by the top tier of AI companies.
An AI21 acquisition would be modest in Nvidia’s financial terms, given its cash position of roughly $60 billion, but strategically meaningful. It would be the company’s fourth significant acquisition in Israel and its second-largest after the $7 billion purchase of Mellanox in 2020, which became the backbone of Nvidia’s networking and data-center interconnect business. In 2023, Nvidia also acquired Deci and Run:ai for a combined $1 billion.
The talks come as Nvidia faces rising competitive pressure on multiple fronts. Google’s TPU chips are increasingly positioned as alternatives to Nvidia’s GPUs for AI workloads, particularly within Google’s own cloud ecosystem.
Last weekend, Nvidia reportedly made a far bolder move by acquiring the founder and staff of chip startup Groq for about $20 billion, securing access to technology developed by engineers who previously led Google’s TPU efforts. That deal highlighted Nvidia’s willingness to deploy capital aggressively to defend its dominance in AI infrastructure.
An AI21 acquisition would further cement Nvidia CEO Jensen Huang’s long-term expansion strategy in Israel. Earlier this month, Nvidia announced plans to build a massive new campus in Kiryat Tivon, expected to accommodate up to 10,000 employees by 2031. Nvidia currently employs about 5,000 people in Israel, including roughly 3,000 in Yokneam, the former headquarters of Mellanox, alongside major offices in Tel Aviv and planned expansion in Be’er Sheva.
For Shashua, a sale of AI21 would be a more subdued outcome compared with the $15 billion sale of Mobileye to Intel in 2016. Still, he is already deeply engaged in a new venture, AAI, which recently raised hundreds of millions of dollars in a funding round led by Lightspeed, achieving unicorn status less than two years after its founding. AAI focuses on advanced reasoning and “thinking” models rather than traditional training and inference systems, aiming, in Shashua’s words, “to bring about a new era of discovery by developing the code for superintelligence.”
If finalized, Nvidia’s acquisition of AI21 would highlight a broader shift in the AI industry: that as foundational model development becomes increasingly capital-intensive and concentrated, mid-sized labs are being increasingly absorbed by larger platforms seeking talent, speed, and strategic depth, rather than competing as standalone entities.
