Cerebras Stock – NVIDIA Killer or Luxury Good?

Nearly four years ago we looked at five AI chip startups that might threaten NVIDIA, a company at the time whose largest revenue segment was gaming. Today, one of them – Cerebras (CBRS) – is planning on having an IPO leaving investors wondering just what’s on offer. To put things into context, last quarter NVIDIA’s data center division – a proxy for their AI sales – accounted for 88% of total revenues with $26.3 billion in revenues or $105.2 billion annualized. Cerebras saw hardware sales of around $104 million for the first half of this year or about $208 million annualized revenues. With Cerebras hardware sales just 0.2% of what NVIDIA is churning out, investors can’t help but wonder.

Is this a David and Goliath story where Cerebras eventually starts to steal market share from NVIDIA? Or is Cerebras a premium-priced luxury good that will fade when AI hype does?

The Cerebras S-1

Every IPO begins with an S-1 that provides crucial information for would-be investors. For example, Cerebras breaks down revenues into two components – hardware and services – which accounted for 76% and 24% of revenues respectively for the first half of this year. The combined gross margin of 41% isn’t anywhere near the 75% gross margin NVIDIA realized last quarter, but it takes time for every company to scale and start to realize operating leverage.

Cerebras’s claim to fame is building the largest chips of any kind that are the size of an entire silicon wafer. (That’s about 57x the size of an NVIDIA H100.) The numbers are truly astounding in a nerd sort of way – 52x more compute core, 880x more