Cloud AI Startup Vultr Raises $333 Million at $3.5 Billion Valuation
AMD’s investment is part of how the chip giant plans to make a dent in the artificial intelligence chip market dominated by Nvidia
Chip giant Advanced Micro Devices and hedge fund LuminArx Capital Management raised $333 million for a growth financing round for cloud startup Vultr, a sign of the hot demand for artificial intelligence infrastructure.
West Palm Beach, Fla.-based Vultr said it is now valued at $3.5 billion and plans to use the financing to acquire more graphics processing units, or GPUs, the chips that power AI models. The funding is Vultr’s first injection of outside capital.
The company got its start providing cloud-computing for businesses’ information-technology systems and it also offers AI computing. Vultr said its AI cloud service, in which it leases GPU access to customers, will soon become the biggest part of its business.
For AMD, the investment is a way for “customers to experience AMD GPUs through their platform,” said Mathew Hein, AMD’s chief strategy officer of corporate development. “We look at them as somebody that’s going to be bringing up AMD capacity this generation and future generations.”
AMD aims to become Vultr’s “preferred” AI hardware provider, though it won’t force the choice, Hein said. Earlier this year, AMD unveiled its latest generation of AI chips, called the MI325X, with a next generation of MI350 chips coming next year.
Earlier this month, Vultr announced plans to build its first “supercompute” cluster with thousands of AMD GPUs at its Chicago-area data center.
The funding round follows similar moves by AI chip market leader Nvidia, which alongside other investors, provided more than $400 million to AI cloud provider CoreWeave in 2023. CoreWeave last year also secured $2.3 billion in debt financing by using its Nvidia GPUs as collateral.
Nvidia has spread out access to its GPUs to a large number of cloud providers, as has AMD.
“AMD is trying to figure out how to become more competitive with Nvidia,” said Dave McCarthy, a research vice president in cloud and edge services at research firm International Data Corp. “For AMD to be able to get good billing with an up-and-coming cloud provider like Vultr will help them get more visibility in the market.”
AMD has also invested in cloud providers such as TensorWave, which also offers an AI cloud service. In August, AMD bought the data-center equipment designer ZT Systems for nearly $5 billion.
The market for AI semiconductors will reach an expected $193.3 billion by the end of 2027 from an estimated $117.5 billion this year, according to IDC. Nvidia commands about 95% of the market for AI chips, according to IDC.
Vultr said its cloud platform serves hundreds of thousands of businesses, including Activision Blizzard, the Microsoft-owned videogame company, and Indian telecommunications giant Bharti Airtel.
Vultr’s customers also use its decade-old cloud platform for their core IT systems, said Chief Executive J.J. Kardwell.
There is no shortage of entrants into the AI chip market aiming to challenge Nvidia’s lead. In addition to AMD, startups like SambaNova Systems, for instance, and cloud giants Amazon Web Services and Google seek to offer alternatives to Nvidia’s hardware.
Microsoft, Meta Platforms and Oracle have said they use AMD’s GPUs. A spokesperson for Amazon’s cloud unit said the company works closely with AMD and is “actively looking at offering AMD’s AI chips.”
Like most cloud platform providers, Vultr isn’t sticking with one GPU supplier. It offers Nvidia and AMD GPUs to customers, and plans to keep doing so, Kardwell said. “There are different parts of the market that value each of them,” he added.
The part of the market using AI models rather than training them, deploying a process called AI inference, requires faster speeds and more bandwidth. That plays to Vultr’s strengths and is an area where AMD’s GPUs are competitively priced, Kardwell said.
Like CoreWeave, a New Jersey-based company that got its start in cryptocurrency mining, Vultr is part of a wave of cloud companies getting chips from and being funded by chip makers. Both companies also quickly pivoted to acquiring GPUs to meet the demand for generative AI, said Lee Sustar, an analyst at Forrester.