Rivos, which was seeking over $2 billion in valuation, specializes in developing chips optimized for AI inference workloads, including features like vector extensions and high-bandwidth memory.

Meta’s move to develop in-house chips may complicate existing supplier relationships and introduce regulatory and geopolitical challenges related to chip supply chains.

This move aligns with Meta's broader AI growth plans, with CEO Mark Zuckerberg planning to spend up to $72 billion in 2025 on AI talent, infrastructure, and data centers.

Meta is acquiring chip startup Rivos Inc. to bolster its in-house AI hardware capabilities and reduce reliance on Nvidia GPUs, marking a strategic shift in its AI infrastructure.

While RISC-V architecture offers flexibility and cost advantages, its relative immaturity compared to established architectures presents risks in performance and scalability for demanding AI applications.

The industry-wide implications include increased competition among hyperscalers for custom chip development, potential regulatory scrutiny over market dominance, and a trend toward more diversified and innovative AI hardware ecosystems.

The acquisition has already impacted the stock market, with Nvidia’s shares dipping amid fears of heightened competition in AI hardware.

This acquisition signals a significant industry shift, encouraging other tech giants to pursue in-house chip design, potentially leading to increased fragmentation and innovation in AI hardware.

Investors should watch Meta’s capital expenditures and the performance of its custom silicon, as these factors will be critical for its long-term competitiveness in AI.

Meta’s stock remains a strong buy according to Wall Street, with an average target price nearly 20% above current levels, reflecting high confidence in its AI strategy.

Meta previously relied heavily on Nvidia GPUs, purchasing hundreds of thousands of units, which exposed it to supply chain risks and high costs, prompting the shift toward in-house solutions.

The industry trend toward vertical integration highlights the benefits of proprietary silicon, including better performance, control over product roadmaps, and cost savings, with open-source architectures like RISC-V gaining traction.