Harvard dropouts raise $120 million to take on Nvidia's AI chips

Nvidia has been the hottest story on Wall Street of late, increasing eightfold in value since the end of 2022 and soaring past $3 trillion in market cap this month.

A 2-year-old startup founded by Harvard dropouts has just raised $120 million in venture funding to try and build a competitive chip and take on Nvidia in artificial intelligence.

Headquartered in Cupertino, California — home to Apple — Etched is developing a chip called Sohu, which the company says will be used to train and deploy AI models using "transformers," the core architecture underpinning advancements like OpenAI's ChatGPT.

Co-founder and CEO Gavin Uberti said that as AI develops, most of the technology's power-hungry computing requirements will be filled by customized, hard-wired chips called ASICs. Their efficiency comes in executing only the AI model they were designed to perform, in contrast to general purpose graphics processing units (GPUs) from Nvidia that are more capable but are also much costlier.

"We're making the biggest bet in AI," Uberti said in an interview. "If transformers go away, we'll die. But if they stick around, we're the biggest company of all time."

Uberti and his co-founders are aware that it's a high-risk wager, and that they're going up against some of the most richly capitalized and competitive companies on the planet. While $120 million is a lot of money to raise in a series A, it's about how much Nvidia generates in revenue in half a day. Nvidia's sales have more than tripled annually for three consecutive quarters, topping $26 billion in the latest period.

Nvidia has more than 80% of the market share for AI chips, according to estimates. Etched is among a group of startups attracting capital to go after the burgeoning