AI chip startup Etched in talks for $20B valuation: WSJ

AI chip startup Etched has emerged as a significant player in the artificial intelligence hardware sector, with recent developments indicating a valuation of $5 billion and $1 billion in signed customer contracts. Founded in 2022 by Harvard dropouts Gavin Uberti and Chris Zhu, Etched has raised a total of $800 million in funding, including a $500 million round in December 2024 at a $5 billion post-money valuation. The company is developing a specialized chip, Sohu, designed to optimize the performance of transformer-based AI models, which are widely used in applications such as OpenAI’s ChatGPT and Google’s Gemini.

Etched’s approach focuses on inference workloads, where AI models generate responses after being trained. The startup claims that higher performance per dollar compared to traditional GPUs. The company has partnered with TSMC for chip fabrication and has begun testing its first systems with customers. Etched’s strategy is to offer full systems, including custom-designed racks and software, to provide a more efficient and cost-effective solution for AI inference.

Despite its rapid growth, Etched faces significant challenges in scaling production to meet its 2027 roadmap. While the chip has demonstrated strong performance in lab settings, transitioning to large-scale manufacturing remains a critical hurdle for many hardware startups. The company’s backers include prominent investors such as Peter Thiel, Geoffrey Hinton, and Fei-Fei Li, as well as institutional investors like Jane Street and Two Sigma.

Etched’s progress reflects broader trends in the AI chip market, where demand for specialized hardware is increasing. Competitors such as Cerebras and Groq have also attracted substantial funding, signaling a shift in the industry as companies seek to optimize AI performance and reduce energy consumption. As Etched moves forward with its plans to ship its first systems this summer, the market will be watching closely to see if it can deliver on its ambitious goals.