AI chip start-up Groq in fundraising talks to take on Nvidia

Semiconductor start-up Groq is in talks with investors about a round of funding that would make it one of the most well-capitalised challengers to specialised artificial intelligence chipmakers such as Nvidia.

Tiger Global Management has held discussions about leading a $300m financing in Groq, valuing the company at roughly $1bn, according to people briefed on the talks.

Groq had raised $250m of the total, including convertible notes it sold to investors last year, the people said. Tiger Global and Groq declined to comment.

The investor interest in Groq underlines the high-stakes race among chipmakers hoping to power rapid developments in machine-learning applications.

Based in Silicon Valley and founded in 2016, Groq began making its technology commercially available for the first time last year. The company’s chips are geared towards so-called inference tasks, which use knowledge gained from deep learning to make predictions on new data.

Bristol-based Graphcore and Silicon Valley-based SambaNova Systems have also raised large sums to develop AI chips that compete with Nvidia’s offerings.

Groq chief executive Jonathan Ross previously co-founded a team that developed Google’s Tensor Processing Unit, a custom machine-learning chip the company uses in its data centres. Google has said the chip helped the software program AlphaGo beat the legendary Go player Lee Sedol.

In 2019, Groq claimed its “tensor streaming processor” had become the first chip able to process one quadrillion operations per second, though it has performed below those levels in customer testing.

Groq said last year it was working with customers in financial services developing autonomous vehicles, in addition to research labs, without naming them. Graphcore, which investors valued at $2.5bn in December, has struck partnerships with Dell and Microsoft.

Linley Gwennap, principal analyst at the chip research firm Linley Group, said Groq’s chips stood out for tasks that were sensitive to latency, or performance lags, such as voice command and recognition.

Gwennap said Nvidia’s chips still beat many of the newer competitors for mainstream applications, such as large data centres and cloud computing.

“Nobody’s really broken out of the start-up pack yet,” Gwennap said. “It’s going to probably take another round of products and investment to see what they can come up with.”

The new investment in Groq shows how venture capitalists have recently grown more comfortable backing upstart chipmakers after years of avoiding the sector because of the dominance of Intel and Nvidia.

Groq said last year it had raised funding from D1 Capital Partners, the venture arm of Japanese electronics company TDK and other investors, without disclosing financial details. The company received its initial funding from Chamath Palihapitiya’s Social Capital.

Tiger Global has been one of the most active venture capital investors this year, striking about one deal every two days. The firm has largely avoided early bets on tech-heavy companies such as chipmakers, preferring high-margin consumer internet and software companies.

Lee Fixel’s Addition and Spruce House Partnership, a New York-based investment firm, were also participating in the round of funding, said people briefed on the discussions. Addition declined to comment, and Spruce House did not return a message seeking comment. Press Las Vegas