Nvidia's dominance in the AI chip field has made it difficult for startups to raise funds, and the number of financing transactions 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 has caused difficulties for its potential competitors in financing. A bigger challenge. 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.

In the chip market, NVIDIA occupies a dominant position in processing large amounts of language data. Generative AI models gradually become smarter by being exposed to more data, a process called training. As Nvidia becomes more powerful in the field, chip manufacturing companies trying to compete with it face challenges facing an increasingly difficult situation. Venture capitalists view these startups as riskier and are reluctant to inject large amounts of capital. It can take more than $500 million to advance a chip design to a working prototype, so investor withdrawals could soon threaten the startup's prospects

Eclipse Ventures partner Greg Laihao said: "Nvidia has been dominant, which made us realize how difficult it is to enter this market. This has led to a pullback in investment in startups in this space, or at least a reduction in investment in many of these companies."

Data from the database analysis platform Pitchbook shows that as of the end of August this year, U.S. chip start-ups have raised US$881.4 million. This compares to $1.79 billion in the first three quarters of 2022. As of the end of August, the number of transactions dropped from 23 to 4. Nvidia declined to comment.

According to 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. But in March this year, the company managed to secure new investment, albeit only $13 million.

Mythic CEO Dave Rick noted that Nvidia has played an "indirect" role in the financing difficulties of the entire artificial intelligence chip industry, as investors want to make "huge investments and high returns." A lucrative home run investment.” However, a difficult economic environment has exacerbated the downturn in the cyclical semiconductor industry

A mysterious startup called Rivos has recently encountered difficulties in raising capital, according to two sources familiar with the situation. Rivos designs chips for data servers. A spokesman for Rivos said Nvidia's dominance in the market has not affected its fundraising efforts and that its hardware and software "continue to excite our investors" for now. , Rivos is in a legal dispute with Apple, which accuses Rivos of infringing intellectual property confidentiality, making Rivos face greater challenges in financing

Investors have become more demanding

According to Sources revealed that chip startups seeking financing are facing more demanding requirements from investors. These investors are demanding that the companies have a product that can be released within months or is already commercially available. About two years ago, new investments in chip startups were typically $200 million or $300 million in size. But that number has dropped to about $100 million, according to PitchBook analyst Brendan Burke.

At least two artificial intelligence chip startups have convinced investors to allay their concerns by touting potential customers or relationships with high-profile executives.

In an effort to raise $100 million, Canadian AI chip startup Tenstorrent hired CEO Jim Keller in August this year. Keller is a near-legendary chip designer who has designed chips for Apple, AMD and Tesla

Silicon Valley AI chip startup D-Matrix expects revenue of less than $10 million this year, but its revenue is expected to be less than $10 million this year. It raised $110 million last week, thanks to support from Microsoft and the Windows operating system maker's pledge to test D-Matrix's new artificial intelligence chips when they launch next year.

While these chipmakers in Nvidia’s shadow are struggling, startups in artificial intelligence software and related technologies do not face the same constraints. According to PitchBook data, as of August this year, these startups have received a total of approximately US$24 billion in financing.

Despite Nvidia’s dominance in artificial intelligence computing, the company is not infallible. AMD plans to launch a chip to compete with Nvidia this year, while Intel has grown by leaps and bounds by acquiring a competing product through acquisition. According to sources, in the long term, these chips may become a replacement for Nvidia chips, and some similar use cases 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. (Xiao Xiao)

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