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Startups that make chips and related hardware smell cash in the air. Venture capitalists are more eager than they’ve been in years to fund these capital-intensive businesses, excited by Nvidia’s $20 billion Groq deal and signs other strategic buyers are circling. Founders are seizing the moment.
Nuvacore, a startup focused on designing new central processing units that was founded by former Apple chip engineers, came out of stealth mode just three months ago with a seed round led by Sequoia Capital. Now Nuvacore, whose founders sold their prior startup to Qualcomm, is close to raising an additional $200 million, or more, according to a person who talked to Nuvacore’s executives.
FuriosaAI, a South Korean startup that’s designed a chip specialized for running large language models, is raising $500 million or more at a valuation of more than $2 billion before the new investment led by Korean venture firm DSC Investment, according to a person with direct knowledge of the matter.
At least a year ago, FuriosaAI turned down a $800 million acquisition offer from Meta Platforms, according to Bloomberg, which earlier reported on the size of its funding target. Instead, Meta bought semiconductor startup Rivos.
And d-Matrix, which designs AI inference chips that work in tandem with graphics processing units such as Nvidia’s to speed up running AI, has talked to investors about raising hundreds of millions of dollars and is targeting a valuation of at least $5 billion, up from a $2 billion valuation in November, according to a person with direct knowledge of the discussions. Talks are in progress, and the final numbers could change.
These funding rounds follow capital raising by several other chip startups. SambaNova, which makes chips designed to run AI models, recently raised $1 billion at a $11 billion valuation, including the new money, The Information was first to report. Ayar Labs, which makes equipment for ultrafast connections between AI chips, is also raising at a sharply higher valuation, we’ve reported.
Of course, chip design is a risky business for venture investors. Chips that have a promising prototype may not make it to production. Chips that begin production may never work at scale. Few of the chip startups that have raised hundreds of millions or billions of dollars in the past year or two have material revenue. Of those that have, some like Cerebras have disclosed customer concentration that would spook investors in a less bullish era.
In a sign of the headwinds chip designers face, SambaNova late last year explored a sale after an earlier fundraising stalled. But its fortunes improved this year after backer Intel announced a deal to use SambaNova’s chips and the startup ended up raising money, at a $2 billion valuation, in February.
As with SambaNova’s case, investors backing chip startups can hope that another big company, such as Nvidia or Meta, is waiting in the wings to buy the business or ink a lucrative licensing deal with it.
Elon Musk’s SpaceX could also be on the hunt for chip companies, as it unveils a new Terafab project to make and supply AI chips for SpaceX and Tesla. For example, Musk last month received a greenlight from the Federal Trade Commission to acquire Mesh Optical Technologies, a startup founded by SpaceX alums working on using light to move data between data centers at faster speeds. Others are likely to follow.
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