$60B AI chip darling Cerebras almost died early on, burning $8M a month
Key Takeaways
- ▸Cerebras held a blockbuster IPO, reaching a valuation of approximately $60 billion with both co-founders becoming billionaires
- ▸In 2019, the company was burning $8 million per month and had spent nearly $200 million trying to solve the 'packaging' problem—an unprecedented engineering challenge around heat dissipation, power delivery, and data movement for their 58x larger chips
- ▸The company had to invent custom manufacturing solutions, including a specialized machine to secure the wafer, after the entire semiconductor industry had failed to solve this scale of challenge for decades
Summary
Cerebras Systems held a blockbuster IPO this week, becoming a $60 billion public company with both co-founders now billionaires. The company, which sells AI inference chips to giants like OpenAI and AWS, has an incredible backstory: in 2019, it nearly collapsed while burning through $8 million per month trying to solve what seemed like an impossible engineering problem.
The challenge was unprecedented in the semiconductor industry. While traditional chip design focuses on making CPUs faster and cheaper by cramming more transistors onto smaller wafers, Cerebras had a radical idea: create one giant chip from an entire wafer instead of dicing it into pieces. This would allow massive AI compute without forcing multiple chips to communicate with each other. However, this introduced compounding engineering problems no one had ever solved at scale.
After successfully designing and manufacturing the mega chip with TSMC, Cerebras hit a critical roadblock: "packaging." Their chips were 58 times larger than conventional chips and consumed 40 times more power than anything ever attempted. There were no existing heat sinks, vendors, or manufacturing partners. The team had to invent new solutions—including a custom machine to bolt in 40 screws simultaneously without cracking the wafer. After destroying an enormous number of chips and incincerating nearly $200 million, the team finally solved the cooling and data movement problems in July 2019.
Today, Cerebras has OpenAI as both a customer and strategic partner. OpenAI loaned Cerebras $1 billion secured by warrants that conditionally grant OpenAI approximately 33 million shares. Notably, acquisition talks between Cerebras and OpenAI had occurred around 2017 but fell through amid internal disputes among OpenAI's founders—some of whom are angel investors in Cerebras.
- OpenAI nearly acquired Cerebras but talks fell through; today OpenAI is a customer and strategic partner with a $1 billion loan and conditional warrants for ~33 million shares
