Cerebras Systems, an artificial intelligence chipmaker, has filed for an initial public offering (IPO) with the Securities and Exchange Commission (SEC). The company, which was valued at $4 billion after a $250 million series F financing round in 2021, is targeting a $1 billion IPO at a $7 billion to $8 billion valuation. Cerebras CEO Andrew Feldman has publicly claimed that the company’s inference offering is 20 times faster than Nvidia’s at a fraction of the price.
In 2023, Cerebras generated about $78.7 million in revenue, a 220% increase year over year. Through the first half of 2024, the company has grown its revenue to $136.4 million, although it still hasn’t earned a profit, reporting a nearly $67 million loss during this period. While Cerebras’ claims of superior performance have garnered attention, the company faces significant challenges in its IPO journey.
None of the three leading tech investment banks—Goldman Sachs, Morgan Stanley, and JPMorgan Chase—are involved in the deal, which is notable given their significant presence in tech IPOs. One of the major concerns for Cerebras is its reliance on a single Middle Eastern customer based in Abu Dhabi, United Arab Emirates.
cerebras faces challenges in IPO journey
This customer accounted for 87% of Cerebras’ revenue in the first half of the year and is responsible for a $1.43 billion purchase commitment. The high customer concentration raises questions about the company’s financial stability. Furthermore, Cerebras is seeking clearance from the Committee on Foreign Investment in the U.S. (CFIUS) for the Middle Eastern firm, G42, to increase its investment.
G42 has agreed to purchase a $335 million stake by April, potentially becoming the largest owner. The delay in CFIUS’s review of this investment is seen as a significant factor behind the likely postponement of Cerebras’ IPO. Adding to the complexity of the situation is the past of Cerebras CEO Andrew Feldman, who pleaded guilty in 2007 to circumventing accounting controls when he was vice president of marketing at a public company called Riverstone Networks.
Despite these challenges, Cerebras could still proceed with its IPO, driven by strong market interest in AI chips and Nvidia’s near-record trading levels. However, the company will need to navigate the competitive landscape of AI technology companies and address concerns related to its customer concentration and foreign investment. As the AI chip market continues to evolve, with Nvidia currently controlling an estimated 95% of the market for AI training and inference chips, the outcome of Cerebras’ IPO and its impact on the industry remain to be seen.
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