College dropouts raise $120 million to take on Nvidia’s AI chips
Etched co-founders Robert Watchen, Gavin Uberti, and Chris Zhu
Etched
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 opportunity. Primary Venture Partners led the round. Peter Thiel, Stanley Druckenmiller and Cruise founder Kyle Vogt are also backers.
Despite Nvidia’s head start and, what some developers describe a moat, new chipmakers are plowing ahead anyway, mainly because the opportunity is so big. Other chip startups taking on Nvidia include Cerebras Systems, which is building a physically larger AI chip, and Tenstorrent, which is using a trendy technology called RISC-V to build AI chips.
“The reason we were so excited about what we’re doing, why we dropped out of school and we’ve convinced so many people to leave these chip projects — this is the most important thing to be working on,” said Robert Wachen, Etched’s operating chief. “The entire future of technology is going to be shaped by whether the infrastructure can handle the scale.”
Semiconductors have traditionally been one of the hardest industries for startups given the long development cycles, the significant capital required to build a chip and the need to engage with a limited number of manufacturing partners, such as Taiwan Semiconductor Manufacturing Co., which is building Etched’s chip.
Venture capitalists invested $6 billion in AI semiconductor companies in 2023, up slightly from $5.7 billion in 2022, according to data from PitchBook.
Hard coded
Etched’s Sohu chip
Uberti and Chris Zhu started to work on a chip company after Uberti did a summer internship working on compliers. That put him in contact with the low-level hardware ideas that led to Etched.
The pair dropped out of Harvard in 2022, and added Uberti’s college roommate, Wachen. They quickly started hiring chip industry veterans. The company settled in Cupertino, and now has 35 employees. It offers housing stipends to new hires.
“When ChatGPT came out, and Nvidia stock exploded, and especially when every other model coming out would be a transformer too, we found ourselves in the right place at the right time,” Uberti said.
Etched is preparing to bring Sohu to market, and the founders say they’ll be ready to show something later this year. The startup is also working to secure customers and says that technology companies are eager to check out new AI chips.
For the business to work, companies that are spending billions of dollars on GPUs will need to see some significant savings in building custom chips designed for their specific AI model and be willing to make trade-offs in flexibility.
By specializing on transformers, which moves data in predictable ways from the chip to memory, Etched’s Sohu chip can dedicate less space to memory and more to the kinds of transistors that define a chip’s raw computing power, Uberti said.
Another aspect of Eteched’s efficiency is that the chip has one large core. That results in fewer inefficient calculations done by a part called a streaming multiprocessor to coordinate calculations by different cores.
Uberti says the impact of specialized AI chips could be similar to how custom chips called ASICs, first introduced in 2013 specifically for mining bitcoin or ether, reduced the demand for Nvidia GPUs.
The Etched founders expect the need for chips to run these models will increase, especially once they’re used to serve AI software millions of times per minute.
They also say that by hard coding the AI architecture into the chip, their device can reduce the latency of returning answers, unlocking new use cases, such as AI agents or real-time voice conversations. Etched says its chips are more than 10 times faster than Nvidia’s GPUs, thanks to its simpler architecture and single use case.
But Etched is taking on some of the most valuable companies in the world, including Nvidia, which have massive development teams and access to the capital needed to secure production and improve their chips on an annual basis.
Etched, which has a countdown timer displayed in its headquarters, has to move faster.
“The way that we’re going to win this specialized AI chip market, and the ones after this, is by being the first product to market,” Uberti said.
The Nasdaq MarketSite in New York, June 9, 2023.
Michael Nagle | Bloomberg | Getty Images
Silicon Valley executives and financiers publicly opened their wallets in support of President Donald Trump’s 2024 presidential run. The early returns in 2025 aren’t great, to say the least.
Following Trump’s sweeping tariff plan announced Wednesday, the Nasdaq suffered steep consecutive daily drops to finish 10% lower for the week, the index’s worst performance since the beginning of the Covid pandemic in 2020.
The tech industry’s leading CEO’s rushed to contribute to Trump’s inauguration in January and paraded to Washington, D.C., for the event. Since then, it’s been a slog.
The market can always turn around, but economists and investors aren’t optimistic, and concerns are building of a potential recession. The seven most valuable U.S. tech companies lost a combined $1.8 trillion in market cap in two days.
Apple slid 14% for the week, its biggest drop in more than five years. Tesla, led by top Trump adviser Elon Musk, plunged 9.2% and is now down more than 40% for the year. Musk contributed close to $300 million to help propel Trump back to the White House.
Nvidia, Meta and Amazon all suffered double-digit drops for the week. For Amazon, a ninth straight weekly decline marks its longest such losing streak since 2008.
With Wall Street selling out of risky assets on concern that widespread tariff hikes will punish the U.S. and global economy, the fallout has drifted down to the IPO market. Online lender Klarna and ticketing marketplace StubHub delayed their IPOs due to market turbulence, just weeks after filing with the Securities and Exchange Commission, and fintech company Chime is also reportedly delaying its listing.
CoreWeave, a provider of artificial intelligence infrastructure, last week became the first venture-backed company to raise more than $1 billion in a U.S. IPO since 2021. But the company slashed its offering, and trading has been very volatile in its opening days on the market. The stock plunged 12% on Friday, leaving it 17% above its offer price but below the bottom of its initial range.
“You couldn’t create a worse market and macro environment to go public,” said Phil Haslett, co-founder of EquityZen, a platform for investing in private companies. “Way too much turbulence. All flights are grounded until further notice.”
CoreWeave investor Mark Klein of SuRo Capital previously told CNBC that the company could be the first in an “IPO parade.” Now he’s backtracking.
“It appears that the IPO parade has been temporarily halted,” Klein told CNBC by email on Friday. “The current tariff situation has prompted these companies to pause and assess its impact.”
‘Cave rapidly’
During last year’s presidential campaign, prominent venture capitalists like Marc Andreessen backed Trump, expecting that his administration would usher in a boom and eliminate some of the hurdles to startup growth set up by the Biden administration. Andreessen and his partner, Ben Horowitz, said in July that their financial support of the Trump campaign was due to what they called a better “little tech agenda.”
A spokesperson for Andreessen Horowitz declined to comment.
Some techies who supported Trump in the campaign have taken to social media to defend their positions.
Venture capitalist Keith Rabois, a managing director at Khosla Ventures, posted on X on Thursday that “Trump Derangement Syndrome has morphed into Tariff Derangement Syndrome.” He said tariffs aren’t inflationary, are effective at reducing fentanyl imports, and he expects that “most other countries will cave and cave rapidly.”
That was before China’s Finance Ministry said on Friday that it will impose a 34% tariff on all goods imported from the U.S. starting on April 10.
At Sequoia Capital, which is the biggest investor in Klarna, outspoken Trump supporter Shaun Maguire, wrote on X, “The first long-term thinking President of my lifetime,” and said in a separate post that, “The price of stocks says almost nothing about the long term health of an economy.”
However, Allianz Chief Economic Advisor Mohamed El-Erian warned on Friday that Trump’s extensive raft of import tariffs are putting the U.S. economy at risk of recession.
“You’ve had a major repricing of growth prospects, with a recession in the U.S. going up to 50% probability, you’ve seen an increase in inflation expectations, up to 3.5%,” he told CNBC’s Silvia Amaro on the sidelines of the Ambrosetti Forum in Cernobbio, Italy.
Former Microsoft CEOs Bill Gates, left, and Steve Ballmer, center, pose for photos with CEO Satya Nadella during an event celebrating the 50th Anniversary of Microsoft on April 4, 2025 in Redmond, Washington.
Stephen Brashear | Getty Images
Meanwhile, executives at tech’s megacap companies were largely silent this week, and their public relations representatives declined to provide comments about their thinking.
Microsoft CEO Satya Nadella was in the awkward position on Friday of celebrating his company’s 50th anniversary at corporate headquarters in Redmond, Washington. Alongside Microsoft’s prior two CEOs, Bill Gates and Steve Ballmer, Nadella sat down with CNBC’s Andrew Ross Sorkin for a televised interview that was planned well before Trump’s tariff announcement.
When asked about the tariffs at the top of the interview, Nadella effectively dodged the question and avoided expressing his views about whether the new policies will hamper Microsoft’s business.
Ballmer, who was succeeded by Nadella in 2014, acknowledged to Sorkin that “disruption is very hard on people” and that, “as a Microsoft shareholder, this kind of thing is not good.” Ballmer and Gates are two of the 12 wealthiest people in the world thanks to their Microsoft fortunes.
C-suites may not be able to stay quiet for long, especially if the recent turmoil spills into next week.
Lise Buyer, who previously helped guide Google through its IPO and now works as an adviser to companies going public, said there’s no appetite for risk in the market under these conditions. But there is risk that staffers get jittery, and they’ll surely look to their leaders for some reassurance.
“Until markets settle out and we have the opportunity to access valuation levels, public company CEOs should work to calm potentially distressed employees,” Buyer said in an email. “And private company managements should refine plans to get by on dollars already in the treasury.”
— CNBC’s Hayden Field, Jordan Novet, Leslie Picker, Annie Palmer and Samantha Subin contributed to this report.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports12 months agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business3 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway