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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.

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Inside one of the first all-female hacker houses in San Francisco

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Inside one of the first all-female hacker houses in San Francisco

For Molly Cantillon, living in a hacker house wasn’t just a dream, but a necessity.

“I had lived in a few hacker houses before and wanted to replicate that energy,” said Cantillon, 20, co-founder of HackHer House and founder of the startup NOX. “A place where really energetic, hardcore people came together to solve problems. But every house I lived in was mostly male. It was obvious to me that I wanted to do the inverse and build an all-female hacker house that created the same dynamic but with women.”

Cantillon, who has lived in several hacker houses over the years, saw a need for a space dedicated exclusively to women. That’s why she co-founded HackHer House, the first all-female hacker house in the San Francisco Bay Area.

“A hacker house is a shared living space where builders and innovators come together to work on their own projects while collaborating with others,” said Jennifer Li, General Partner at Andreessen Horowitz and sponsor of the HackHer House. “It’s a community that thrives on creativity and resource sharing, making it a cost-effective solution for those in high-rent areas like Silicon Valley, where talented founders and engineers can easily connect and support each other.”

Founded by Cantillon, Zoya Garg, Anna Monaco and Anne Brandes, this house was designed to empower women in a tech world traditionally dominated by men. 

“We’re trying to break stereotypes here,” said Garg, 21, a rising senior at Stanford University. “This house isn’t just about living together; it’s about creating a community where women can thrive in tech.”

Located in North Beach, HackHer House was home this summer to seven women, all of whom share the goal of launching successful ventures in tech. 

Venture capital played a key role in making HackHer House possible. With financial backing, the house offered subsidized rent, allowing the women to focus on their projects instead of struggling with the Bay Area’s notoriously high living costs.

“New grad students face daunting living expenses, with campus costs reaching the high hundreds to over a thousand dollars a month,” said Li. “In the Bay Area, finding a comfortable room typically starts at $2,000, and while prices may have eased slightly, they remain significantly higher than the rest of the U.S. This reality forces many, including founders, to share rooms or crash on friends’ couches just to make ends meet.” 

Hacker houses aren’t new to the Bay Area or cities like New York and London. These live-in incubators serve as homes and workspaces, offering a collaborative environment where tech founders and innovators can share ideas and resources. In a city renowned for tech advancements, hacker houses are viewed as critical for driving the next wave of innovation. By providing affordable housing and a vibrant community, these spaces enable entrepreneurs to thrive in an otherwise cutthroat and expensive market.

Watch this video to see how Hacker House is shaping the future of women in tech.

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Elon Musk’s X will be allowed back online in Brazil after paying one more fine

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Elon Musk's X will be allowed back online in Brazil after paying one more fine

The Federal Supreme Court (STF) in Brazil suspends Elon Musk’s social network after it fails to comply with orders from Minister Alexandre de Moraes to block accounts of those being investigated by the Brazilian justice system. 

Cris Faga | Nurphoto | Getty Images

X has to pay one last fine before the social network owned by Elon Musk is allowed back online in Brazil, according to a decision out Friday from the country’s top justice, Alexandre de Moraes.

The platform was suspended nationwide at the end of August, a decision upheld by a panel of judges on Sept. 2. Earlier this month, X filed paperwork informing Brazil’s supreme court that it is now in compliance with orders, which it previously defied.

As Brazil’s G1 Globo reported, X must now pay a new fine of 10 million reals (about $2 million) for two additional days of non-compliance with the court’s orders. X’s legal representative in Brazil, Rachel de Oliveira, is also required to pay a fine of 300,000 reals.

The case dates back to April, when de Moraes, the minister of Brazil’s supreme court, known as Supremo Tribunal Federal (STF), initiated a probe into Musk and X over alleged obstruction of justice.

Musk had vowed to defy the court’s orders to take down certain accounts in Brazil. He called the court’s actions “censorship,” and railed online against de Moraes, describing the judge as a “criminal” and encouraging the U.S. to end foreign aid to Brazil.

In mid-August, Musk closed down X offices in Brazil. That left his company without a legal representative in the country, a federal requirement for all tech platforms to do business there.

By Aug. 28, de Moraes’ court threatened a ban and fines if X didn’t appoint a legal representative within 24 hours, and if it didn’t comply with takedown requests for accounts the court said had engaged in plots to dox or harm federal agents, among other things.

Earlier this month, the STF froze the business assets of Musk companies, including both X and satellite internet business Starlink, operating in Brazil. The STF said in court filings that it viewed Starlink parent SpaceX and X as companies that worked together as related parties.

Musk wrote in a post on X at that time that, “Unless the Brazilian government returns the illegally seized property of and SpaceX, we will seek reciprocal seizure of government assets too.”

On August 29, 2024, in Brazil, the Minister of the Supreme Court, STF Minister Alexandre de Moraes, orders the blocking of the accounts of another company, Starlink, of Elon Musk, to guarantee the payment of fines imposed by the STF due to the lack of representatives of X in Brazil. 

Ton Molina | Nurphoto | Getty Images

As head of the STF, de Moraes has long supported federal regulations to rein in hate speech and misinformation online. His views have garnered pushback from tech companies and far-right officials in the country, along with former President Jair Bolsonaro and his supporters.

Bolsonaro is under investigation, suspected of orchestrating a coup in Brazil after losing the 2022 presidential election to current President Luiz Inacio Lula da Silva.

While Musk has called for retribution against de Moraes and Lula, he has worked with and praised Bolsonaro for years. The former president of Brazil authorized SpaceX to deliver satellite internet services commercially in Brazil in 2022.

Musk bills himself as a free speech defender, but his track record suggests otherwise. Under his management, X removed content critical of ruling parties in Turkey and India at the government’s insistence. X agreed to more than 80% of government take-down requests in 2023 over a comparable period the prior year, according to analysis by the tech news site Rest of World.

X faces increased competition in Brazil from social apps like Meta-owned Threads, and Bluesky, which have attracted users during its suspension.

Starlink also faces competition in Brazil from eSpace, a French-American firm that gained permission this year from the National Telecommunications Agency (Anatel) to deliver satellite internet services in the country.

Lukas Darien, an attorney and law professor at Brazil’s Facex University Center, told CNBC that the STF’s enforcement actions against X are likely to change the way large technology companies will view the court.

“There is no change to the law here,” Darien wrote in a message. “But specifically, big tech companies are now aware that the laws will be applied regardless of the size of a business and the magnitude of its reach in the country.”

Musk and representatives for X didn’t immediately respond to a request for comment on Friday.

Late Thursday, X Global Government Affairs posted the following statement:

“X is committed to protecting free speech within the boundaries of the law and we recognize and respect the sovereignty of the countries in which we operate. We believe that the people of Brazil having access to X is essential for a thriving democracy, and we will continue to defend freedom of expression and due process of law through legal processes.”

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OpenAI sees roughly $5 billion loss this year on $3.7 billion in revenue

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OpenAI sees roughly  billion loss this year on .7 billion in revenue

Sam Altman, CEO of OpenAI, at the Hope Global Forums annual meeting in Atlanta on Dec. 11, 2023.

Dustin Chambers | Bloomberg | Getty Images

OpenAI, the creator of ChatGPT, expects about $5 billion in losses on $3.7 billion in revenue this year, CNBC has confirmed.

The company generated $300 million in revenue last month, up 1,700% since the beginning of last year, and expects to bring in $11.6 billion in sales next year, according to a person close to OpenAI who asked not to be named because the numbers are confidential.

The New York Times was first to report on OpenAI’s financials earlier on Friday after viewing company documents. CNBC hasn’t seen the financials.

OpenAI, which is backed by Microsoft, is currently pursuing a funding round that would value the company at more than $150 billion, people familiar with the matter have told CNBC. Thrive Capital is leading the round and plans to invest $1 billion, with Tiger Global planning to join as well.

OpenAI CFO Sarah Friar told investors in an email Thursday that the funding round is oversubscribed and will close by next week. Her note followed a number of key departures, most notably technology chief Mira Murati, who announced the previous day that she was leaving OpenAI after six and a half years.

Also this week, news surfaced that OpenAI’s board is considering plans to restructure the firm to a for-profit business. The company will retain its nonprofit segment as a separate entity, a person familiar with the matter told CNBC. The structure would be more straightforward for investors and make it easier for OpenAI employees to realize liquidity, the source said.

OpenAI’s services have exploded in popularity since the company launched ChatGPT in late 2022. The company sells subscriptions to various tools and licenses its GPT family of large language models, which are powering much of the generative AI boom. Running those models requires a massive investment in Nvidia’s graphics processing units.

The Times, citing an analysis by a financial professional who reviewed OpenAI’s documents, reported that the roughly $5 billion in loses this year are tied to costs for running its services as well as employee salaries and office rent. The costs don’t include equity-based compensation, “among several large expenses not fully explained in the documents,” the paper said.

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