Cerebras Systems has found that the easiest way to win AI chip glory is to pay Sam Altman a huge wodge of cash.
According to the Financial Times, the AI chipmaker thought about going public roughly 18 months ago, then bottled it. That was lucky, because it is now set to list this week at a $47 billion valuation that would have looked barking mad at the end of 2024.
What changed was not just the technology. Cerebras managed to launch itself into Silicon Valley’s shiniest orbit, otherwise known as the Altman-osphere.
When it first tried for an initial public offering, Cerebras had an interesting product but not many buyers. Its dinner plate-sized chips can beat Nvidia’s smaller and much-hyped GPUs by some measures, partly because they avoid the need for external memory.
The snag in 2024 was that almost all its revenue came from Abu Dhabi-based G42. That AI outfit is run by a member of the emirate’s ruling family, which made the customer list look a bit thin.
Since then, Cerebras has bagged new customers, most notably OpenAI. Instead of selling chips to Sam Altman’s outfit, Cerebras will give the ChatGPT maker cloud computing powered by its own semiconductors.
OpenAI gets access to 750 megawatts of computing power for three years. It can extend and enlarge the deal, which it might fancy since the arrangement covers just one-fortieth of the compute OpenAI reckons it needs by 2030.
People familiar with the matter put the going rate for 750 megawatts of compute at about $9 billion, meaning OpenAI could bring in about $27 billion across three years.
At Cerebras’ gross margin of around 40 per cent, the OpenAI tie-up might magic up about $10 billion of profit for its new pal. That is handy for a company whose operations lost money last year.
Getting into AI’s top table is not cheap. Cerebras is handing OpenAI warrants over time that could give it a tenth of the company’s shares.
Based on a $155 share price at the midpoint of its IPO range, that stake is worth about $5 billion. Cerebras is giving about half the deal’s profit away for a seat inside Altman’s magic circle.
The bet is obvious enough. Where OpenAI goes, others are expected to follow. This route is familiar for OpenAI. It struck a similar deal with AMD last October, after which the chipmaker’s share price tripled.
An earlier alliance with Nvidia, the dominant AI chipmaker, saw Nvidia invest in OpenAI’s stock through a recent $30 billion fundraising. Altman gets data centres to train and run his AI models, while widening the club of firms with a financial interest in OpenAI’s survival.
Cerebras’s backers will reckon that kissing the ring was worth it. With perhaps $3 billion of revenue this year, the company is heading for a listing at 15 times sales, richer than mighty Nvidia.
A year ago, with just $500 million of estimated revenue and one serious customer, Cerebras would have been lucky to fetch a quarter of its current market value. Apparently, friends can be bought after all.
