Start-up companies have difficulty financing, Nvidia dominates the field of AI chips, investment volume fell by 80%

According to news on September 12, many investors said that Nvidia has achieved dominance in the field of artificial intelligence (AI) chip manufacturing, which makes its potential competitors encounter greater challenges in financing.

In the second quarter of this year, the number of financing transactions for chip startups in the United States dropped by 80% compared with the same period last year.

Nvidia dominates the chip market, processing massive amounts of language data. Generative AI models gradually become smarter by being exposed to more data, a process called training. As Nvidia has emerged as a powerful player in the field, chip manufacturing companies trying to compete with it have Things are getting tougher. Venture capitalists view these startups as higher risk and are reluctant to invest heavily. Advancing a chip design to a working prototype stage can require more than $500 million in funding, so investor withdrawals could soon threaten a startup's prospects

Eclipse Ventures partner Greg Reihau said : "Nvidia has been dominant, which has opened our eyes to the difficulties of entering this market. This has led to less investment in startups in this space, or at least less investment in many of them."

Data from the database analysis platform Pitchbook shows that as of the end of August this year, US chip start-ups have raised US$881.4 million. That compares with $1.79 billion in the first three quarters of 2022. The number of transactions fell from 23 to four by the end of August. Nvidia declined to comment.

According to a report from the technology website The Register, the artificial intelligence chip startup Mythic raised a total of approximately US$160 million, but ran out of cash last year and was almost forced to cease operations. However, in March of this year, the company managed to secure new investment, albeit only $13 million. Mythic CEO Dave Rick said that Nvidia "indirectly" exacerbated the overall artificial intelligence crisis. The financing dilemma of the smart chip industry is because investors want "home run investments with huge investments and huge returns." However, the difficult economic environment has exacerbated the cyclical semiconductor industry downturn.

A mysterious startup called Rivos has recently encountered difficulties in raising funds, according to two people familiar with the matter. Rivos' main goal is to design chips for use in data servers. A spokesman for Rivos said that Nvidia's dominance in the market has not hindered its financing efforts and that its hardware and software "continue to make our investments Rivos is currently in a legal battle with Apple, which accuses Rivos of stealing intellectual property secrets, exacerbating its financing challenges.

Investors are becoming more demanding

According to sources, chip startups seeking financing are facing more demanding requirements from investors. These investors are demanding products that the companies can launch or already have on sale within months. About two years ago, new investments in chip startups were typically in the $200 or $300 million range. However, that number has now dropped to about $100 million, according to PitchBook analyst Brendan Burke. At least two AI chip startups are hyping up potential customers or Relationships with high-profile executives convinced investors and allayed their concerns. Revised content: At least two artificial intelligence chip startups have succeeded in convincing investors and allaying their doubts by widely publicizing their relationships with potential customers or high-profile executives.

In August, for After raising $100 million, Canadian AI chip startup Tenstorrent hired CEO Jim Keller. Keller is a near-legendary chip designer who has designed chips for Apple, AMD and Tesla.

Silicon Valley artificial intelligence chip startup D-Matrix expects revenue this year to be less than $10 million, but it successfully raised $110 million in funding last week. The achievement comes thanks to Microsoft's support and the Windows operating system maker's commitment to test D-Matrix's new AI chips when they launch next year. Although these chips are manufactured in Nvidia's shadow Businesses are having a hard time, but startups in artificial intelligence software and related technologies do not face the same constraints. According to PitchBook data, these startups have received about $24 billion in financing as of August this year.

Despite Nvidia’s dominance in artificial intelligence computing, the company is not invulnerable in the field. AMD plans to launch a chip this year to compete with Nvidia, while Intel has grown by leaps and bounds by acquiring a competing product through acquisition. Sources believe that in the long term, these chips have the potential to become a replacement for Nvidia chips.

There are also some similar use cases that may also provide opportunities for competitors. For example, chips that perform data-intensive calculations for predictive algorithms are an emerging niche market. Nvidia doesn't dominate this space, and it's an area ripe for investment.

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