Cerebras Systems' Nasdaq IPO offers an opportunity to buy into a potential challenger to high-flying AI chipmaker Nvidia, though extra scrutiny of its key offshore partner could complicate the timing.
Cerebras, which claims to have developed the world’s fastest commercially available artificial intelligence technology, filed on Monday for a primary and secondary offering led by Citigroup, Barclays, UBS and Wells Fargo as part of an 11-firm syndicate.
The IPO could raise US$800m–$1bn, bankers close to the offering said.
The timing of the public filing implies that Cerebras, which filed confidentially in June, could make its debut ahead of the US presidential election in November.
Yet regulatory scrutiny of the company's multi-faceted partnership with a Middle Eastern AI company and concerns around the use of powerful AI technology outside the US could delay the offering.
Cerebras' IPO could still price in October though it is more likely to move ahead in November or December, one banker said.
Cerebras' wafer-scale chip, WSE-3, is designed to suit AI needs and is 57 times larger, with 52 times more compute cores, 880 times more on-chip memory and 7,000 times more memory bandwidth than the leading commercially available GPU, Nvidia's H100 chip, according to its filing.
42 – the answer to everything
Notably, Cerebras generated 87% of first-half revenue from strategic partner Group 42, an Abu Dhabi-based cloud-computing company that develops and deploys AI for governments and large corporations.
Reports last year suggested US intelligence agencies had warned G42 was working with large Chinese companies and could be a conduit for Chinese interests to get around export controls on sensitive US AI technology. But earlier this year, G42 indicated it had divested its Chinese interests, while a US$1.5bn investment in the company by Microsoft appeared to box out Chinese interests.
G42, which has committed to buy US$1.43bn of Cerebras' systems and services, is owned by Abu Dhabi sovereign investor Mubadala, private equity firm SilverLake, billionaire fund manager Ray Dalio’s family office and others, including Microsoft.
G42 owns 1.4m Cerebras Class A shares directly, a 1% stake bought for US$40m in 2021, but has agreed to buy US$335m of convertible preferred stock to give it more than 5%. Future purchases of Cerebras technology could entitle G42 to buy stock at a 17.5% discount to prevailing market prices.
The US Treasury's Committee on Foreign Investment in the United States is reviewing the agreement, though the parties amended the deal earlier this month so that the stock would be non-voting and no longer require regulatory approval. CFIUS is still considering the matter, and the arrangement would also have to pass muster with the SEC.
Losses
Despite the surge in investor interest, Cerebras is one of few AI-related IPOs to emerge this year and its lack of profitability bucks investors' more conservative preference for companies with steady cashflow and earnings.
In the first half, Cerebras reported a net loss of US$66.6m on revenue of US$136.4m, the latter up from just US$8.7m a year earlier. For comparison, Nvidia in the six months to the end of July reported net income of US$31.5bn on revenue of US$56bn.
While the filing has ignited talk that the company could recreate the success of Nvidia, which now sports a nearly US$3trn market cap, bankers said investors would look instead at smaller chipmakers such as AMD and Qualcomm as valuation comps.
One banker also noted that Cerebras was not competing directly with Nvidia since it was selling much larger chips in smaller batches.
The IPO comes with some big-name venture capital backing. Cerebras counts Foundation Capital, Benchmark Capital, Philippe Laffont’s Coatue Management and Brad Gerstner’s Altimeter among its biggest shareholders. A 2021 funding round valued the company at more than US$4bn but the IPO is likely to push the valuation to US$8bn or more.