Nvidia competitor Etched hits $5B valuation, $1B in sales for AI chip

In a significant development for the AI chip industry, startup Etched has unveiled its latest progress, marking a pivotal moment following the successful manufacturing of its chips by TSMC earlier this year. The company proudly reported securing $1 billion in contract orders for its innovative systems, which are powered by these advanced chips. Etched is currently engaged in testing its inaugural product—dubbed 'frontier inference clusters'—with select customers. These comprehensive bundles include not only the chips but also custom-designed racks and software, all aimed at optimizing the efficiency and cost-effectiveness of running frontier AI models. This focus on enhancing inference processes addresses one of the most significant bottlenecks and cost challenges faced by AI companies, which has drawn considerable attention from investors seeking solutions. Founded in 2022, Etched has successfully raised a total of $800 million to date. The startup's most recent funding round, which remained undisclosed until now, closed in December and brought the company's post-money valuation to an impressive $5 billion. Among its investors are notable entities such as VentureTech Alliance, Jane Street, Hudson River Trading, Two Sigma, and Ribbit Capital, alongside angel investments from prominent figures in the AI field like Andrej Karpathy, Geoffrey Hinton, Fei-Fei Li, Arthur Mensch, and Scott Wu. The company's cap table also boasts billionaires Stanley Druckenmiller and Peter Thiel. While the announcement was framed as Etched emerging from stealth mode, co-founders CEO Gavin Uberti and President Robert Wachen have been in discussions about their chip ambitions since 2024. Both left Harvard to pursue their entrepreneurial journey as Thiel fellows, and by 2024, they had already captured the interest of investors with over $125 million raised. However, the path to success was not without its obstacles. In 2023, the founders faced challenges in attracting investor interest, despite presenting a compelling 30-page proposal advocating for the necessity of specialized chips for AI applications. Initially, they encountered rejection from major investors, and the company was reportedly operating on a tight budget, nearly facing cash shortfalls. Today's investment climate contrasts sharply, as investors are eager to back AI-related ventures, particularly those focused on chip technology that accelerates inference processes. Competitors like Cerebras and Groq have recently made headlines with notable IPOs and funding rounds, while tech giants such as Amazon, Google, and Microsoft continue to develop their own AI chips. Even OpenAI has announced its first custom chip, created in partnership with Broadcom.