Nvidia is paying approximately $11.9 billion for Hugging Face, with an additional retention program worth up to $1 billion for employees joining Nvidia.

Needham said Nvidia is gaining access to a critical part of the AI development process where developers discover, download and deploy models.

Raymond James compared Hugging Face to a combination of GitHub, an app store and a model registry, highlighting its role in the AI ecosystem.

Nvidia (NVDA) shares were on track to reach a two-month high in early trading Friday after analysts backed the chipmaker's $12.93 billion acquisition of AI platform Hugging Face, saying the deal gives Nvidia greater access to the software and developer ecosystem around AI models.

In a note to investors cited by StreetInsider, Needham analyst Rajvindra Gill maintained a 'Buy' rating and $300 price target on Nvidia, stating the company is paying for access to a key part of the AI development process rather than simply acquiring Hugging Face's existing earnings.

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Raymond James also viewed the deal positively, maintaining a 'Strong Buy' rating. The firm said while the acquisition was "largely immaterial" for Nvidia's balance sheet, it was a "strategically valuable move." It added that the deal was "less about buying revenue and more about controlling a critical entry point in the AI model ecosystem and development process."

NVDA stock gained as much as 1.5% in pre-market trade. On Stocktwits, retail sentiment around the AI bellwether fell to 'bearish' from 'neutral' territory over the past day.

NVDA stock price performance year-to-date and pre-market on September 4 as of 8:00 a.m. ET | Source: TradingView

Nvidia Expands Beyond AI Chips

Raymond James described Hugging Face as combining elements of "GitHub + an app store + a model registry," noting its role in distributing and managing AI models.

Gill said the deal gives Nvidia control of "a critical entry point in the AI model ecosystem and development process." Hugging Face is where developers discover, download, evaluate and deploy AI models, giving Nvidia a direct connection to developers building AI applications.

Nvidia agreed to pay about $11.9 billion to Hugging Face shareholders, with another $1 billion in stock-based incentives intended to retain employees. The total value of the transaction is about $12.93 billion.

Nvidia said Hugging Face will remain an open platform following the acquisition. The company supports multiple hardware and cloud providers, meaning developers are not required to use Nvidia hardware. Maintaining that neutrality will be important to preserving the platform's appeal.