Shulou(Shulou.com)11/24 Report--

September 12 news, a number of investors said that Nvidia has won the dominant position in artificial intelligence (AI) chip manufacturing, which makes its potential competitors face greater challenges in financing.

In the second quarter of this year, the number of u.s. financing deals of chip start-ups fell 80% from a year earlier.

Nvidia dominates the chip market, which handles large amounts of language data. By accessing more data, generative artificial intelligence models gradually become smarter, a process known as training.

As Nvidia becomes more and more powerful in this field, it becomes more and more difficult for companies trying to make competing chips. Venture capitalists think these startups are riskier, so they are reluctant to provide large capital injections. Pushing chip design to a runnable prototype phase can cost more than $500 million, so investor divestment could quickly threaten the prospects of startups.

"Nvidia continues to dominate, showing us how difficult it is to break into this market," said Greg Reicow, a partner at Eclipse Ventures. "this has led to a decline in investment in start-ups in this area, or at least in many of them."

Us chip start-ups had raised $881.4 million by the end of August, according to Pitchbook, a database analytics platform. That compares with $1.79 billion in the first three quarters of 2022. By the end of August, the number of transactions had fallen from 23 to four. Nvidia declined to comment.

Artificial intelligence chip start-up Mythic, which raised about $160 million, ran out of cash last year and was almost forced to stop operations, according to technology website The Register. But in March, the company succeeded in securing new investment, albeit with only $13 million.

Dave Rick, chief executive of Mythic, said Nvidia had "indirectly" exacerbated the financing difficulties for the entire AI chip industry because investors wanted "huge and lucrative home runs". However, the difficult economic environment has exacerbated the downturn in the cyclical semiconductor industry.

According to two people familiar with the situation, a mysterious start-up called Rivos has recently encountered difficulties in financing. Rivos is dedicated to designing chips for data servers.

A spokesman for Rivos said Nvidia's market dominance did not hinder its fundraising efforts and that its hardware and software "continue to excite our investors".

Rivos is currently in a legal battle with Apple, which accuses Rivos of stealing intellectual property secrets, adding to its financing challenges.

Investors are becoming more demanding chip startups seeking financing are facing tougher demands from investors. Sources said they asked the company to have a product that could be released or already on sale within a few months.

About two years ago, new investment in chip start-ups was usually $200m or $300m. But that figure has fallen to about $100m, according to Brendan Burke, an analyst at PitchBook.

At least two AI chip start-ups have persuaded investors and reassured them by trumpeting their potential customers or relationships with high-profile executives.

In August, Tenstorrent, a Canadian AI chip start-up, hired chief executive Jim Keller to raise $100m. Keller is a nearly legendary chip designer who has designed chips for Apple, AMD and Tesla.

D-Matrix, a Silicon Valley AI chip start-up that expects revenue of less than $10 million this year, raised $110 million last week thanks to support from Microsoft and the Windows operating system maker's commitment to test D-Matrix 's new artificial intelligence chip after it launches next year.

While these chipmakers in the shadow of Nvidia are struggling, start-ups in artificial intelligence software and related technologies do not face the same constraints. As of August, these start-ups had raised about $24 billion, according to PitchBook.

Although Nvidia dominates artificial intelligence computing, the company is not unassailable in this area. AMD plans to launch a chip that competes with Nvidia this year, while Intel has grown by leaps and bounds by acquiring a competitive product. Sources believe that in the long run, these chips are likely to become a substitute for Nvidia chips.

Some similar use cases may also provide opportunities for competitors. For example, chips that perform data-intensive computing for predictive algorithms are an emerging niche market. Nvidia does not dominate this area, and the time is ripe to invest in it.

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