Graphcore raises $ 222 million to face Nvidia with AI chips

LONDON – UK-based chip maker Graphcore announced on Tuesday that it had raised $ 222 million in investment as it appears to face US rivals Nvidia and Intel.

Graphcore said it will use the funding to support its global expansion and to accelerate the development of its intelligence processing units (IPUs), designed specifically to power artificial intelligence programs. The company has already shipped tens of thousands of chips to customers, including Microsoft and Dell.

The E-Series financing round, which comes less than a year after Graphcore increased its latest round by an extension of $ 150 million, values ​​the company at $ 2.777 billion, up from $ 1.5 billion in 2018 .

Graphcore CEO and co-founder Nigel Toon told CNBC in July: “We are now at the point where we are not really looking for risky investors in the business. We are more interested in companies that would be long-term investors and holders of stocks, perhaps, in public markets, if we ever get to that point. “

At the time, Toon said making it public was “ideally what we would like to do,” but stressed that “there is still a lot of water to flow under the bridge before it gets to that point.”

The total investment in Graphcore now stands at $ 710 million and the four-year-old company has $ 440 million in cash.

The final round of funding was led by the Ontario Pension Plan Board, while other new investors included private equity investor Baillie Gifford, venture capitalist Draper Esprit, and managed funds. by Fidelity International and Schroders.

On Tuesday, Toon said in a statement: “Having the support of these highly respected institutional investors says something very powerful about how markets view Graphcore now. The confidence they have in us comes from the competition we have shown in building the our products and our business. “

He added: “We have created a technology that drastically outperforms legacy processors such as GPUs, a powerful set of software tools that adapt to the needs of AI developers, and a global sales operation that drives our products. in the market”.

Graphcore was founded in June 2016 in Bristol, England, by Toon and Simon Knowles, who sold their former chip company, Icera, to Nvidia for $ 435 million in 2011. The couple formed the initial idea for Graphcore in a small pub called Marlborough Tavern. in Bath in January 2012.

Today, the company employs about 450 people in Bristol, Cambridge, London, Beijing, Oslo, Palo Alto, Seattle and Hsinchu in Taiwan. He expects the figure to grow to 600 by the end of 2021.

But rapid growth has not been cheap. In 2019 it produced a pre-tax loss of $ 95.9 million on revenue of $ 10.1 million, according to an annual report submitted to Companies House by the UK Business Register.

The heavyweights of Santa Clara, Intel and Nvidia, are two of the obvious competitors in the AI ​​chip market, given their experience in chip manufacturing. Companies have not revealed how many of their AI-optimized chips have been sold. However, more than a trillion computer chips are expected to be shipped by 2020, according to market data website Statistica. In 2019, Intel’s share of the global chip market reached 15.7% and has been the market leader every year since 2008, except in 2017, when Samsung ranked number one.

Graphcore’s Toon had criticized Nvidia’s plan to buy British chip designer Arm from SoftBank for $ 40 billion, saying it’s bad for the competition.

“We believe Nvidia’s proposed acquisition of Arm is anti-competitive,” he said. “There is a risk of closing or limiting the access of other companies to the most advanced designs of CPU processors that are so important in the technological world, from data centers, mobile phones, cars and embedded devices of all kinds.” .

Google, Amazon and Apple are also working on their own AI chips.

Graphcore’s previous investors include Microsoft and BMW iVentures, as well as venture companies like Atomico of London and Sequoia of Silicon Valley, which has also supported Nvidia.

Last month, Sequoia colleague Matt Miller told CNBC: Graphcore “is in this position where there are always people coming to them trying to give them more money. So they don’t need funding. They’re well funded. over the next few years, but they definitely have people trying to invest in the company. “

He added: “I don’t think you have to face Nvidia because the market is huge. Assuming Nvidia is like such a big task. It’s a huge company with billions of revenue and amazing equipment that does all sorts of wonderful things. I think that what Graphcore has a chance to do is be a very strong player in the AI ​​microprocessor market.It continues to make great progress with many of the cloud vendors and a lot of people want to diversify.they don’t want to be.all with a single chip “.

Graphcore launched its second generation IPU earlier this year despite the outbreak of the coronavirus pandemic.