Qualcomm Inc. is reportedly nearing a deal to acquire Modular Inc., an artificial intelligence software infrastructure company, for around $4 billion. Sources familiar with the matter indicate that an announcement could be made in the coming weeks, though a final agreement is not guaranteed and terms could change. This acquisition would significantly strengthen Qualcomm's position in the AI sector, a market currently dominated by Nvidia.
The deal values Modular Inc. at more than double its last valuation of $1.6 billion from a September funding round, where it raised $250 million. The startup, founded in 2022 by Chris Lattner and Tim Davis (both formerly of Google), has raised a total of $380 million from investors including DFJ Growth, General Catalyst, Google Ventures, and Greylock Partners. Modular specializes in software that optimizes how AI models run across various chips and data centers, addressing the fragmented nature of AI computing infrastructure.
This strategic move by Qualcomm aims to give it an edge in the AI race, particularly in the inference phase of AI (running trained models) rather than solely focusing on hardware. By controlling the software layer, Qualcomm could influence which hardware is used for AI workloads. The acquisition would be larger and more central to Qualcomm’s AI ambitions than its previous tuck-in acquisitions, such as the $2.4 billion agreement to buy Alphawave IP Group last year.
The timing of the potential acquisition is notable, as Qualcomm plans to hold its investor day on Wednesday, where it is expected to showcase its progress beyond smartphone technology. The company's shares have risen by about 30% this year. However, some analysts caution that AI valuations may be outpacing revenue, and the $4 billion price tag for Modular will test investor confidence, despite the belief that ownership of the software layer is crucial for the future of AI.
