AI chip start-up Groq in funding talks to take on Nvidia

Semiconductor start-up Groq is in talks with investors about a round of funding that would make it one of the best-capitalized challengers of artificial intelligence chipmakers like Nvidia.

Tiger Global Management has had discussions about directing a $ 300 million financing to Groq, valuing the company at around $ 1 billion, according to people familiar with the discussions.

Groq had raised $ 250 million of the total, including the convertible notes sold to investors last year, the people said. Tiger Global and Groq declined to comment.

Investor interest in Groq underscores the high-stakes race among chipmakers hoping to fuel rapid developments in machine learning applications.

Based in Silicon Valley and founded in 2016, Groq began commercializing its technology for the first time last year. The company’s chips are geared toward so-called inference tasks, which use knowledge gained through deep learning to make predictions about new data.

Based in Bristol Graphcore and Silicon Valley-based SambaNova Systems have also raised significant sums to develop AI chips that compete with Nvidia’s offerings.

Groq chief executive Jonathan Ross co-founded a team that developed Google’s Tensor processing unit, a custom machine-learning chip the company uses in its data centers. Google said the chip helped AlphaGo software beat legendary Go player Lee Sedol.

In 2019, Groq claimed that its “tensor streaming processor” had become the first chip capable of processing a quadrillion operations per second, although it performed below those levels in customer tests.

Groq said last year he worked with financial services clients developing autonomous vehicles, in addition to research labs, without naming them. Graphcore, which investors valued to $ 2.5 billion in December, has partnerships with Dell and Microsoft.

Linley Gwennap, senior analyst at chip research firm Linley Group, said Groq’s chips are distinguished by tasks that are sensitive to latency or performance delays, such as voice command and recognition.

Gwennap said Nvidia’s chips still beat many of the new competitors for consumer applications, such as large data centers and cloud computing.

“No one is really out of the starter pack yet,” Gwennap said. “It will probably take another round of products and investments to see what they can deliver.”

The new investment in Groq shows how venture capitalists have recently become more comfortable supporting chipmakers who have managed to avoid the industry after years due to the dominance of Intel and Nvidia.

Groq said last year it raised funds from D1 Capital Partners, the venture capital arm of Japanese electronics firm TDK and other investors, without disclosing financial details. The company received its initial funding from the registered capital of Chamath Palihapitiya.

Tiger Global has been one of the most active venture capitalists this year, closing about one deal every two days. The company largely avoided early betting on high-tech companies such as chipmakers, preferring high-margin Internet and consumer software companies.

The addition of Lee Fixel and Spruce House Partnership, a New York-based investment firm, were also participating in the funding round, people briefed on the discussions said. Addition declined to comment, and Spruce House did not return a message requesting comment.

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