Cerebras IPO Will Test Investor Appetite for AI Chip Startups
How many AI chip designers can the public market support? We’ll get a sense of that on Thursday when Cerebras Systems, the biggest of a new generation of chip designers dedicated to AI, is expected to go public at a valuation of $35 billion. If it follows the pattern of other AI-related IPOs, such as cloud firm CoreWeave, Cerebras will be a big hit.
CoreWeave went public a year ago at $40 a share and, despite a lot of ups and downs, it closed on Friday at $114. (Most other tech IPOs from last year, that had no AI exposure, have had a very different experience.) CoreWeave has been well received even though it is burning through billions of dollars in cash right now as it ramps up its network of data centers. Investors’ favorable reaction to it suggests Wall Street will look past the fact that Cerebras is also burning cash and focus on its AI exposure. (Demand for stock in the IPO is also strong, Bloomberg reported on Friday).
Indeed, we are at a moment of peak AI infrastructure optimism, with shortages of computing capacity apparent constantly (hence Anthropic’s deal with SpaceX this past week). Of course, the capacity shortfall is an argument for CoreWeave, whose customers include Anthropic, Microsoft, OpenAI and Meta Platforms, but not necessarily for Cerebras. Is there the same kind of demand for another AI chip supplier?
Buyers of chips—mostly cloud firms and big AI developers—have plenty of choice already. Aside from Nvidia, which dominates the field, there are AI chips from Advanced Micro Devices, Google and Amazon. Meta and Microsoft are developing their own chips. Chinese firms have Huawei and many others. So what’s Cerebras’ pitch?
Cerebras does have OpenAI as a customer (and shareholder), even though OpenAI is also developing its own chip in concert with Broadcom. Cerebras also struck a deal to supply its chip to Amazon Web Services as a supplement to Amazon’s Trainium AI chip. But there’s no getting around the fact that the chip market is crowded. That’s perhaps why some other AI chip startups have effectively sold themselves: Groq licensed its tech to Nvidia, which hired the startup’s top people, for instance. And Meta hired a key group of engineers from another chip startup, Graphcore.
Of course, a takeover of Cerebras might still happen—after the IPO.