Cerebras Shares Jump 18% in a Day as Investors Bet on Nvidia Rival
Cerebras, the chip company, disappointed investors over the month since it went public. The stock fell 6% after creating early buzz, when the share price jumped 70% and the company ended its first trading day with a market value of about $60 billion. ● On the way to a huge deal with Google and Nvidia? The report that sent Intel shares soaring ● Interview | The senior Israeli at Wall Street’s chip star: “It’s nice that people are betting on us”
Expectations were sky-high. Cerebras was seen as a company challenging Nvidia on its own turf, developing a processor designed for artificial intelligence that can itself perform training, inference and AI agent operations. Its launch came just as Nvidia is struggling to persuade its manufacturing partner TSMC to increase chip production, and as Intel and AMD are succeeding in placing more chips in the server farms of major technology companies.
This week, Cerebras made a surprising turn, surging 18% in the last trading session on Monday, but today, Tuesday, it is falling in line with the negative trend in chip stocks. What drove the positive sentiment that lifted the company’s market value back to $53 billion?
Morgan Stanley gave the stock a price target of $250, compared with $237 at which it traded before the market opened. According to the analysts, the production process for the company’s new graphics processor is fast relative to existing alternatives, and it is the only processor in its field that is already operating today in large-scale AI servers. UBS said that “Cerebras has shown strong commercial momentum, including deals with OpenAI and Amazon, along with potential agreements with additional technology companies.”
The average analyst price target now stands at $295, $45 above Morgan Stanley’s forecast, while the most optimistic outlook, from Citigroup, puts the price at $340, about $90 above the current price.
What is behind investors’ enthusiasm for the new chip, and is it justified?
Cerebras’s processor is considered the largest in the world. It is built from an entire silicon wafer, while the processors made by Nvidia, Intel or AMD are built from dozens of wafer fragments. The giant chip is effectively made up of several processing units placed next to one another, allowing especially fast communication channels and close proximity to memory components, two resources in which Nvidia’s processors are considered more limited.
To overcome internal communication and storage limitations, Nvidia acquired Mellanox, which compensates with a “fleet” of external components that accelerate communication and access to data in server farms.
Revolution or niche?
Cerebras is currently considered the most advanced company in the field of processors dedicated to inference tasks, challenging Nvidia’s dominance. Other companies are also active in the area, such as Groq, which was sold to Nvidia, and SambaNova, which became a strategic investment for Intel, whose founders even appeared alongside Intel’s CEO at a conference in Taiwan.
The three companies are developing unique chip architectures on the assumption that Nvidia’s processors, although powerful and versatile, are too expensive for specific tasks, and that the market needs cheaper, more focused chips. However, Jensen Huang, Nvidia’s CEO and founder, described Groq’s product as a “niche chip.”
Dion Harris, head of data center at Nvidia, told Globes: “There are processing workloads that require low latency, such as high-frequency trading, financial applications or AI agents that need to communicate with one another at top speeds. This is relevant for about 20% of our customers.”
Harris adds that for the overwhelming majority of companies building AI infrastructure, Nvidia’s core products provide the best solution. “When we analyze the component mix in server farms, most companies developing giant models will continue to rely on our core products, while niche solutions will only be used by those with specific needs,” he explains. “No one will run their entire data center on such a solution, it just doesn’t make financial sense.”
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