Call it a hot chip summer. Investors are flocking to startups making semiconductors and components to run AI more efficiently, minting high valuations for businesses looking to compete with Nvidia and other stalwarts. Etched, a four-year-old startup run by young Harvard dropouts trying to develop a specialized AI chip, announced a $800 million funding round Tuesday. Last week, our colleagues reported that chip startups SambaNova and xLight are both raising hundreds of millions in new funding. Next up is Ayar Labs, an 11-year-old company founded by academic researchers, which makes equipment for ultrafast connections between AI chips. The startup is in talks to raise at least $200 million at a sharply higher price than the $3.75 billion valuation it fetched, including the money raised, in a round announced a few months ago, according to a person with direct knowledge of the fundraising efforts.
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Welcome back! It’s Julia and Cory.
Call it a hot chip summer. Investors are flocking to startups making semiconductors and components to run AI more efficiently, minting high valuations for businesses looking to compete with Nvidia and other stalwarts. Etched, a four-year-old startup run by young Harvard dropouts trying to develop a specialized AI chip, announced a $800 million funding round Tuesday. Last week, our colleagues reported that chip startups SambaNova and xLight are both raising hundreds of millions in new funding.
Next up is Ayar Labs, an 11-year-old company founded by academic researchers, which makes equipment for ultrafast connections between AI chips. The startup is in talks to raise at least $200 million at a sharply higher price than the $3.75 billion valuation it fetched, including the money raised, in a round announced a few months ago, according to a person with direct knowledge of the fundraising efforts.
The per-share price of the new round is about one-third higher than that previous financing. That would imply a new valuation in the $5 billion range for the San Jose, Calif.–based startup, although the exact valuation discussed couldn’t be learned.
Nvidia, Advanced Micro Devices and Intel’s venture arm have backed the company, and it’s integrating its tech with Nvidia’s. The company’s board includes Intel Chair Craig Barratt and former Intel CEO Pat Gelsinger, who is now a general partner at venture firm Playground Global.
Investors are chasing chip returns on the heels of two big exits: Nvidia’s $20 billion licensing deal for Groq, a designer of AI inference chips, and Cerebras’ initial public offering at a $56 billion valuation.
Ayar’s products use high-speed, light-based connections instead of traditional copper wiring to move data quickly between AI and memory chips in data centers. It’s among a cohort of optical technology companies betting on a shift from copper connections to laser light. These include Lightmatter and Celestial, which Marvell purchased in February for about $3.3 billion.
Startups creating this technology, known as optical interconnects, are in high demand as increasingly complicated and intensive AI workloads put a premium on technology that can make data centers more efficient.
In the current round, Milwaukee-based asset manager Artisan Partners, New York–based Liberty Street Funds and Ark Investment Management, Cathie Wood’s investment management firm, have discussed investing. The funding isn’t yet closed, and terms of the deal could change.
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