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How many AI chip designers can the public market support? We’ll get a sense of that on Thursday when Cerebras Systems, the biggest of a new generation of chip designers dedicated to AI, is expected to go public at a valuation of $35 billion. If it follows the pattern of other AI-related IPOs, such as cloud firm CoreWeave, Cerebras will be a big hit.
CoreWeave went public a year ago at $40 a share and, despite a lot of ups and downs, it closed on Friday at $114. (Most other tech IPOs from last year, that had no AI exposure, have had a very different experience.) CoreWeave has been well received even though it is burning through billions of dollars in cash right now as it ramps up its network of data centers. Investors’ favorable reaction to it suggests Wall Street will look past the fact that Cerebras is also burning cash and focus on its AI exposure. (Demand for stock in the IPO is also strong, Bloomberg reported on Friday).
Indeed, we are at a moment of peak AI infrastructure optimism, with shortages of computing capacity apparent constantly (hence Anthropic’s deal with SpaceX this past week). Of course, the capacity shortfall is an argument for CoreWeave, whose customers include Anthropic, Microsoft, OpenAI and Meta Platforms, but not necessarily for Cerebras. Is there the same kind of demand for another AI chip supplier?
Buyers of chips—mostly cloud firms and big AI developers—have plenty of choice already. Aside from Nvidia, which dominates the field, there are AI chips from Advanced Micro Devices, Google and Amazon. Meta and Microsoft are developing their own chips. Chinese firms have Huawei and many others. So what’s Cerebras’ pitch?
Cerebras does have OpenAI as a customer (and shareholder), even though OpenAI is also developing its own chip in concert with Broadcom. Cerebras also struck a deal to supply its chip to Amazon Web Services as a supplement to Amazon’s Trainium AI chip. But there’s no getting around the fact that the chip market is crowded. That’s perhaps why some other AI chip startups have effectively sold themselves: Groq licensed its tech to Nvidia, which hired the startup’s top people, for instance. And Meta hired a key group of engineers from another chip startup, Graphcore.
Of course, a takeover of Cerebras might still happen—after the IPO.
This Week’s Earnings
This is a quiet week for earnings. The biggest names reporting are design software firm Figma and “buy now, pay later” business Klarna, both on Thursday.
Figma’s earnings will be worth watching, both because of the competitive pressure the company is facing from new AI tools out of Anthropic and other companies, and because of growing questions about how much businesses are willing to spend on AI services.
Now that many AI firms have started charging for AI tools based on how much customers use them, the cost of using AI is suddenly becoming a problem to think through. As Adam Mansfield, from software contract negotiation firm UpperEdge, said on The Information’s TITV Friday, businesses are anxious about the uncertainty of what they’ll have to pay for AI.
On Figma’s last quarterly call in February, Chief Financial Officer Praveer Melwani noted that 75% of the company’s paying customers of any size were consuming AI credits every week, and that new AI features it was introducing were drawing an “ever-increasing number of credits over time.” For Figma, this is an opportunity to make money from AI services—customers get a set number of credits with every subscription seat but can buy more if need be.
The issue for Figma, and every software firm, is that if their customers get surprised by what heavy use of AI services are costing them, they might pull back. We’ll be looking for an update from Figma on the topic this week.
Here’s what to expect in revenue and earnings per share, courtesy of S&P Global Market Intelligence.
Figma (Thursday)
Revenue: $316 million +38.5%
Earnings per share: (0.26 cents)
Klarna (Thursday)
Revenue: $945.6 million +34.8%
EPS: (0.17 cents) compared with (0.26 cents)
In Other News
• Hedge fund TCI cut almost all of its $8 billion stake in Microsoft, the Financial Times reported Friday, due to what CEO Christopher Hohn described in an investor letter as “uncertainty over Microsoft’s competitive position in the future” as AI threatens to replace existing software like Office.
• Salesforce’s chief communications officer, Carolyn Guss, is leaving the sales software giant, according to two people familiar with the matter.
• Apple has reached “a preliminary agreement” with Intel in recent months for manufacturing some chips, The Wall Street Journal reported. Earlier, this week Bloomberg reported that Apple was exploring such a partnership with Intel and Samsung.
• Anthropic is the unnamed customer behind a $1.8 billion cloud deal that Akamai announced on Thursday, according to a person with direct knowledge of the matter. That deal sent the content delivery network provider’s stock soaring 27% on Friday.
Friday on The Information’s TITV
Check out Friday’s episode of TITV in which we unpack our reporting on Microsoft's shifting Copilot strategy.
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