Graphcore, which wants to be an AI chip rival to Nvidia, has shut offices and needs more investor cash

• AI chip startup Graphcore wants to rival market leader Nvidia as the market booms.
• But the company reported a slowdown in sales of its AI hardware, hurting its bottom line in 2022.
• The startup said it needs to raise more cash to keep afloat.

It’s a good time to be in artificial intelligence or chip manufacturing, but not for British firm Graphcore.

Graphcore, which CEO Nigel Toon recently described to Insider as a viable alternative to market leader Nvidia, saw office closures and layoffs, steeper losses, and revenue nearly halved in 2022. The startup also stated that it will require additional funding by mid-2024 in order to survive.

Graphcore, founded in 2016 in Bristol, creates specialized hardware for AI and machine-learning applications. Its main product is AI-focused chips, or IPUs, which are marketed as an alternative to GPUs. Since its inception, the startup has received over $700 million in outside funding from investors such as Sequoia and Microsoft.

However, Graphcore’s financial filings for the fiscal year ending December 31, 2022 show the expense and difficulty of competing with the gorilla Nvidia, which controls roughly 70% of the AI chip market, according to Omdia analysis.

Graphcore’s revenue fell 46% year on year to $2.7 million, while losses increased 18% to $199 million. Graphcore attributed the drop to lower and delayed hardware sales in comparison to 2021.

According to the filings, the company closed its operations in Norway, Japan, and South Korea during the year, laying off at least 137 people.

In the second half of the year, the company refocused on AI cloud computing services, and it warned that it “will require further investment” by May 2024 to stay afloat. Graphcore stated in its filing that it was in talks with investors but had yet to reach an agreement. Insider reported in October that Sequoia Capital had reduced its stake in Graphcore.

Nvidia, on the other hand, has seen its stock rise more than 200% since the beginning of 2023 as demand for its A100 and H100 chips increases.

Toon stated in his September interview that Graphcore was in a “expensive” incubation phase as customers tested its processors.

When asked about its fundraising plans, the company declined to comment, but a spokesperson told Insider that there is “a huge appetite for a powerful, cost-effective alternative to GPUs.”

The company’s “primary focus remains the development and sale of compute systems powered by IPUs,” according to the spokesperson.