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ETFs in Focus as Cerebras Systems Plans IPO Amid AI Chip Boom
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Cerebras Systems is preparing to go public during a surge in artificial intelligence (AI) technology, aiming to become the first chip maker to debut in this environment. The company recently filed for an initial public offering (IPO - Free Report) with the U.S. Securities and Exchange Commission and plans to list on the Nasdaq under the ticker CBRS. However, Cerebras has not yet disclosed the timing or financial details of the IPO.
If Cerebras Systems goes public, Cerebras Systems stock may find a place in semiconductor ETFs like VanEck Semiconductor ETF (SMH - Free Report) , iShares Semiconductor ETF (SOXX - Free Report) , First Trust Nasdaq Semiconductor ETF (FTXL - Free Report) and SPDR S&P Semiconductor ETF (XSD - Free Report) . Renaissance IPO ETF (IPO - Free Report) may also include the Cerebras stock in its portfolio.
Business Model and Competitive Position
Cerebras "design(s) processors for AI training and inference," the filing said, as quoted on investors.com. "We build AI systems to power, cool and feed the processors data. We develop software to link these systems together into industry-leading supercomputers that are simple to use, even for the most complicated AI work."
Cerebras markets its chips as alternatives to NVIDIA’s (NVDA - Free Report) AI-focused hardware. While NVIDIA and other major players like Advanced Micro Devices (AMD - Free Report) dominate the AI chip market, Cerebras has drawn some notable supporters, including OpenAI CEO Sam Altman, who is an investor. The company has experienced rapid growth, reporting a revenue jump from $24.6 million in 2022 to $78.7 million in 2023. In the first half of 2024, its revenues soared to $136.4 million, per barrons.com.
Any Challenge?
Despite revenue gains, Cerebras remains unprofitable, with a net loss of $127.2 million in 2023. This was an improvement from its $177.7 million loss in 2022. The company continues to face challenges in customer diversification, with its largest client, Abu Dhabi-based G42, making up 87% of its revenues in the first half of 2024.
One of Cerebras' biggest hurdles is its limited presence among U.S. tech giants like Microsoft, Amazon, Google, and Meta Platforms, who are significant customers of NVIDIA. While Cerebras claims to be in discussions with large U.S. hyperscalers, it has yet to secure substantial deals in this space.
Competing With Nvidia
Cerebras faces stiff competition from NVIDIA, which dominates the AI chip market by offering not just chips but a full-stack solution, including supercomputers, processor connections, networking and crucial software for AI workloads.
IPO Market Conditions
Cerebras' decision to go public comes during a slow recovery in the IPO market. Though IPO activity has increased in 2024, it remains below the highs of 2021. Despite this, we can expect AI-related businesses to generate significant investor interest.
Any Future Threat to NVIDIA & AMD Stocks?
Cerebras is banking on its third-generation Wafer-Scale Engine, the largest chip ever sold, to distinguish itself from competitors. The company claims that the size of its chip allows for more efficient processing by reducing the need for data movement, which is both time-consuming and power-hungry.
The company projects that the market for AI-related chips and services will grow from $131 billion in 2024 to $452 billion by 2027, per investors.com. Cerebras believes that its unique approach and hardware will help it capture a significant market share from industry biggies like NVIDIA.
Bottom Line
Cerebras Systems aims to create a niche in the booming AI chip market, but it faces hurdles in scaling its business and competing with industry giants like NVIDIA. Its success will depend on securing a more diverse customer base.
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ETFs in Focus as Cerebras Systems Plans IPO Amid AI Chip Boom
Cerebras Systems is preparing to go public during a surge in artificial intelligence (AI) technology, aiming to become the first chip maker to debut in this environment. The company recently filed for an initial public offering (IPO - Free Report) with the U.S. Securities and Exchange Commission and plans to list on the Nasdaq under the ticker CBRS. However, Cerebras has not yet disclosed the timing or financial details of the IPO.
If Cerebras Systems goes public, Cerebras Systems stock may find a place in semiconductor ETFs like VanEck Semiconductor ETF (SMH - Free Report) , iShares Semiconductor ETF (SOXX - Free Report) , First Trust Nasdaq Semiconductor ETF (FTXL - Free Report) and SPDR S&P Semiconductor ETF (XSD - Free Report) . Renaissance IPO ETF (IPO - Free Report) may also include the Cerebras stock in its portfolio.
Business Model and Competitive Position
Cerebras "design(s) processors for AI training and inference," the filing said, as quoted on investors.com. "We build AI systems to power, cool and feed the processors data. We develop software to link these systems together into industry-leading supercomputers that are simple to use, even for the most complicated AI work."
Cerebras markets its chips as alternatives to NVIDIA’s (NVDA - Free Report) AI-focused hardware. While NVIDIA and other major players like Advanced Micro Devices (AMD - Free Report) dominate the AI chip market, Cerebras has drawn some notable supporters, including OpenAI CEO Sam Altman, who is an investor. The company has experienced rapid growth, reporting a revenue jump from $24.6 million in 2022 to $78.7 million in 2023. In the first half of 2024, its revenues soared to $136.4 million, per barrons.com.
Any Challenge?
Despite revenue gains, Cerebras remains unprofitable, with a net loss of $127.2 million in 2023. This was an improvement from its $177.7 million loss in 2022. The company continues to face challenges in customer diversification, with its largest client, Abu Dhabi-based G42, making up 87% of its revenues in the first half of 2024.
One of Cerebras' biggest hurdles is its limited presence among U.S. tech giants like Microsoft, Amazon, Google, and Meta Platforms, who are significant customers of NVIDIA. While Cerebras claims to be in discussions with large U.S. hyperscalers, it has yet to secure substantial deals in this space.
Competing With Nvidia
Cerebras faces stiff competition from NVIDIA, which dominates the AI chip market by offering not just chips but a full-stack solution, including supercomputers, processor connections, networking and crucial software for AI workloads.
IPO Market Conditions
Cerebras' decision to go public comes during a slow recovery in the IPO market. Though IPO activity has increased in 2024, it remains below the highs of 2021. Despite this, we can expect AI-related businesses to generate significant investor interest.
Any Future Threat to NVIDIA & AMD Stocks?
Cerebras is banking on its third-generation Wafer-Scale Engine, the largest chip ever sold, to distinguish itself from competitors. The company claims that the size of its chip allows for more efficient processing by reducing the need for data movement, which is both time-consuming and power-hungry.
The company projects that the market for AI-related chips and services will grow from $131 billion in 2024 to $452 billion by 2027, per investors.com. Cerebras believes that its unique approach and hardware will help it capture a significant market share from industry biggies like NVIDIA.
Bottom Line
Cerebras Systems aims to create a niche in the booming AI chip market, but it faces hurdles in scaling its business and competing with industry giants like NVIDIA. Its success will depend on securing a more diverse customer base.