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AI chipmaker Cerebras files for IPO

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Re: AI chipmaker Cerebras files for IPO

#21

Post by extesy »

alephnerd wrote: post #18
extesy wrote: post #13

Earlier quoted context omitted.

TSMC margins are over 30% and growing [1] - that's very far from "low". [1] https://www.macrotrends.net/stocks/charts/TSM/taiwan-semicon...

30% net due to a near monopoly and a recent upswing due to Nvidia. Almost every other foundry system died because of low net margins. Software (and fabless hardware like chip design) is expected to have 60-70% gross margins or the ability to reach that. Semiconductors is part of TMT just like Software or Telecom, and this has an impact on available liquidity. This is why TSMC is heavily subsidized by the Taiwanese go…

TSMC is neither software nor fabless. I'm not sure we are talking about the same company, there seems to be some disconnect here. For hardware business 30% margins are high, Apple is one of the most famous exceptions.

Re: AI chipmaker Cerebras files for IPO

#22

Post by alephnerd »

extesy wrote: post #21
alephnerd wrote: post #18

Earlier quoted context omitted.

30% net due to a near monopoly and a recent upswing due to Nvidia. Almost every other foundry system died because of low net margins. Software (and fabless hardware like chip design) is expected to have 60-70% gross margins or the ability to reach that. Semiconductors is part of TMT just like Software or Telecom, and this has an impact on available liquidity. This is why TSMC is heavily subsidized by the Taiwanese go…

TSMC is neither software nor fabless. I'm not sure we are talking about the same company, there seems to be some disconnect here. For hardware business 30% margins are high, Apple is one of the most famous exceptions.

> For hardware business

When a foundry wishes to raise capital from the private or public markets, it's bucketed under TMT - which includes software and fabless hardware as well.

This means it's almost impossible to raise capital without a near monopoly and/or government support and intervention - which is what Taiwan did for TSMC and UMC - because the upfront costs are too high and the margins are much lower compared to other subsegments in the same sector.

This is why industrial subsidizes like the CHIPS act are enacted - to minimize the upfront cost of some very CapEx heavy projects (which almost everything Foundry related is).

Re: AI chipmaker Cerebras files for IPO

#23

Post by alephnerd »

est31 wrote: post #14
alephnerd wrote: post #8

Earlier quoted context omitted.

They both contract TSMC to fabricate their chips. The actual design and R&D is still done by Nvidia, Cerebras, AMD, Groq, etc. Think of TSMC like Kinko's - they do printing and fabrication which is very low margins. The main PMF for Cerebras is in simulations, drug discovery, and ofc ML. As I've mentioned before on HN, Public-Private Drug Discovery and NatLab research has been a major driver for HPC over the past 20…

TSMC has a market cap of 0.9T USD. It would be the 7 largest US company by market cap if it were one. Manufacturing chips is extremely profitable, at least in the current climate. It used to be that software is more profitable than hardware, which is more commoditized, but AI gave hardware companies a renaissance of sorts. It's not a simple process at all but requires a lot of engineering and engineers to do it. http…

> Manufacturing chips is extremely profitable

It only became profitable NOW in the last 2-3 years.

Before that, foundry after foundry was shutting down or merging.

TSMC, UMC, Samsung, Intel Foundry Services, and GloFlo are the last men standing after the severe contraction in the foundry model in the 2000s-2010s due to it's extremely high upfront costs and lack of moat to prevent commodification.

Re: AI chipmaker Cerebras files for IPO

#24

Post by AlotOfReading »

est31 wrote: post #7
will-burner wrote: post #2

This is the first I've heard of Cerebras Systems. From the article >Cerebras had a net loss of $66.6 million in the first six months of 2024 on $136.4 million in sales, according to the filing. That doesn't sound very good. What makes them think they can compete with Nvidia, and why IPO right now? Are they trying to get government money to make chip fabs like Intel or something?

Nvidia's moat is real but not big enough that one can't surpass it with a lot of engineering. It's not the only company making AI accelerators, and this has been the case for many years already. The first TPU was introduced in 2015. Nvidia has just managed to get a leader position in the race.

Saying it's "just" a lot of engineering effort to catch up isn't wrong, but it understates the reality. There are very few organizations on earth that have the technical and financial resources to meaningfully compete with even small parts of Nvidia's portfolio. Nvidia's products benefit from that breadth of strengths and the volumes they ship.

They don't just make accelerators, they'll sell you the hardware too (unlike TPUs). They don't just sell you the hardware, the software ecosystem will work too (unlike AMD or Intel). That hardware won't just do a lot of computations, it'll also have a lot of off-chip memory bandwidth (vs Cerebras or others). Need to embed those capabilities in a device that can't fit a wafer cabinet or a server rack's worth of compute, Nvidia will sell you similar hardware that uses a similar stack, certified for your industry (e.g. automotive). Take any of that away and you're left with a significantly weaker offering.

Also they benefit from the priority of paying fabs a lot of money and placing a lot of orders.

If anything, Nvidia is less dominant than they should be because they've managed to ensure absolutely no one wants to buy from them when there are viable alternatives.

Re: AI chipmaker Cerebras files for IPO

#25

Post by ericd »

jrk wrote: post #19
ericd wrote: post #12

Earlier quoted context omitted.

Interesting that they’ve scaled on-chip memory sublinearly with the growth of transistors between their generations, I would’ve thought they would try to bump that number up. Maybe it’s not a major bottleneck for their training runs?

SRAM is scaling significantly more slowly than logic in recent process nodes.

Ahh that explains it, thanks. Seems like a potentially large problem given their strategy.

Re: AI chipmaker Cerebras files for IPO

#27

Post by drcode »

brk wrote: post #17

I’m going to go ahead and predict this flubs long term. Not only is what they are doing very challenging, I’ve had some random brokerage house reach out to me multiple times about investing in this IPO. When your IPO process resorts to cold calling I don’t think it’s a good sign. Granted I have some associations with AI startups I don’t think that had anything to do with the outreach from the firm.

Agreed, it seems like NVIDIA would be happy to make whole-wafer chips if it seemed like a good play.

My guess is there are a lot of bespoke limitations that the software has to work around to run on a "whole wafer" chip, and even companies that have 99% similar designs to Nvidia already are struggling to deal with software incompatibilities, even with such a tiny difference.

Re: AI chipmaker Cerebras files for IPO

#28

Post by ajb »

will-burner wrote: post #3
will-burner wrote: post #2

This is the first I've heard of Cerebras Systems. From the article >Cerebras had a net loss of $66.6 million in the first six months of 2024 on $136.4 million in sales, according to the filing. That doesn't sound very good. What makes them think they can compete with Nvidia, and why IPO right now? Are they trying to get government money to make chip fabs like Intel or something?

> Taiwan Semiconductor Manufacturing Company makes the Cerebras chips. Cerebrus warned investors that any possible supply chain disruptions may hurt the company. They get their chips from the same company that Nvidia does.

Virtually any competitors to Nvidia would be in the same position.

It's not necessarily to TSMC's advantage for Nvidia to become a monopolist either, although they wouldn't be totally dependent on Nvidia even if they did because TSMC serves every chip market.

Re: AI chipmaker Cerebras files for IPO

#29

Post by Cyph0n »

alephnerd wrote: post #8
will-burner wrote: post #3

Earlier quoted context omitted.

> Taiwan Semiconductor Manufacturing Company makes the Cerebras chips. Cerebrus warned investors that any possible supply chain disruptions may hurt the company. They get their chips from the same company that Nvidia does.

They both contract TSMC to fabricate their chips. The actual design and R&D is still done by Nvidia, Cerebras, AMD, Groq, etc. Think of TSMC like Kinko's - they do printing and fabrication which is very low margins. The main PMF for Cerebras is in simulations, drug discovery, and ofc ML. As I've mentioned before on HN, Public-Private Drug Discovery and NatLab research has been a major driver for HPC over the past 20…

> Think of TSMC like Kinko’s

What an amazingly reductive analogy :)

Re: AI chipmaker Cerebras files for IPO

#30

Post by tempusalaria »

On the one hand, the financials are terrible for an IPO in this market.

On the other, Nvidia is worth 3trn so they can sell a pretty good dream of what success looks like to investors.

Personally I would expect them to get a valuation well about the 4bln from the 2021 round, despite the financials not coming close to justifying it.

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