NVIDIA's Market Value Soars, Startup Etched Challenges AI Chip Dominance

NVIDIA's Market Value Soars, Startup Etched Challenges AI Chip DominanceJune 26, 2023 - NVIDIA has become a Wall Street darling, seeing its market capitalization surge eightfold since late 2022, reaching over $3 trillion this month. However, a startup founded by Harvard dropouts, Etched, is poised to challenge NVIDIA's dominance in the artificial intelligence space by developing a competing chip called Sohu

NVIDIA's Market Value Soars, Startup Etched Challenges AI Chip Dominance

June 26, 2023 - NVIDIA has become a Wall Street darling, seeing its market capitalization surge eightfold since late 2022, reaching over $3 trillion this month. However, a startup founded by Harvard dropouts, Etched, is poised to challenge NVIDIA's dominance in the artificial intelligence space by developing a competing chip called Sohu.

Founded just two years ago, Etched is headquartered in Cupertino, California, home to Apple, and has recently secured $120 million in venture funding. The company is developing a chip specifically designed for training and deploying artificial intelligence models based on the "Transformers" architecture, which is at the heart of advancements in technologies like ChatGPT.

Gavin Uberti, co-founder and CEO of Etched, explained that the rising demand for computing resources driven by advancements in AI technology necessitates custom ASICs (application-specific integrated circuit designs). These ASICs, tailored for specific AI models, offer a cost advantage over NVIDIA's general-purpose graphics processing units (GPUs).

"We're going all-in on AI," Uberti said in an interview. "If Transformers go away, we're done. But if they stay, we're going to be the biggest company ever."

Uberti and his partners acknowledge the high-stakes nature of their gamble, facing some of the world's most well-capitalized and competitive companies. While $120 million in Series A funding might sound significant, it represents only half a day's worth of NVIDIA's revenue. NVIDIA's sales have more than doubled for three consecutive quarters, reaching $26 billion in the most recent quarter. Industry estimates suggest NVIDIA controls more than 80% of the AI chip market.

Etched stands out among the startups vying for a piece of this emerging market. The funding round was led by Primary Venture Partners and Positive Sum Ventures, with notable supporters including Peter Thiel, Stanley Druckenmiller, and Kyle Vogt, founder of self-driving company Cruise.

Despite NVIDIA's dominance and a perceived deep "moat" by some developers, new chip makers are undeterred by the sheer opportunity at hand. Other chip startups competing with NVIDIA include Cerebras Systems, which is building larger AI chips, and Tenstorrent, which uses the popular RISC-V technology to develop AI chips.

"We're incredibly excited about what we're doing," said Robert Wachen, Etched's chief operating officer. "That's why we decided to drop out and convince so many people to leave their previous projects to join us. This is the most important work happening right now."

The semiconductor industry has traditionally been a difficult one for startups to enter, requiring lengthy development cycles, significant financial investments, and close collaboration with a limited number of manufacturing partners like TSMC. According to PitchBook data, venture capitalists invested $6 billion in AI semiconductor companies in 202