How Cerebras survived near-failure to reach a $60 billion IPO

Cerebras Systems held a blockbuster IPO on Thursday, ending the week worth about $60 billion. The company’s shares finished Friday at a closing share price of $279. This public debut follows the company’s recovery from technical and financial challenges early in its development. Today, Cerebras sells its chips for inference (an AI compute task) to customers including OpenAI and AWS.

In 2019, when the startup was three years old, Cerebras came dangerously close to failure. According to founder CEO Andrew Feldman, the company was spending about $8 million a month trying to solve a single engineering problem: packaging a silicon wafer. After designing the chip and manufacturing it with TSMC, the team faced a technical problem with packaging, which involves adhering the silicon to a motherboard, delivering power, and managing heating and cooling. The company’s chips were 58 times larger and used 40 times as much power as any chip before them. The team had to invent a machine that could bolt in 40 screws simultaneously to secure the wafer to a board without cracking it. Feldman stated, “At this point, we had incinerated nearly $200 million trying to solve one technical problem.” The breakthrough finally came in July 2019, when the packaged chip successfully ran for the first time. Feldman recalled that watching the computer run was as exciting as watching paint dry, but the team stood in the lab watching the flashing lights, stunned that they had solved the problem. This founding team had previously built and sold server startup SeaMicro to AMD for $334 million in 2012.

Cerebras’ market position is tied to OpenAI, which is both a customer and a partner. According to the company’s S-1 (the SEC filing document for an IPO), OpenAI loaned Cerebras $1 billion secured by warrants (a financial instrument granting the right to buy stock). These warrants conditionally grant OpenAI about 33 million shares of Cerebras stock. As part of the loan agreement, Cerebras also agreed to not sell its wares to specific OpenAI competitors, which include Anthropic. Feldman confirmed the restriction exists but stated it is temporary, designed to ensure Cerebras can deliver necessary capacity to OpenAI.

Why it matters

Cerebras’ journey from near-bankruptcy to a public valuation of about $60 billion underscores the high capital and technical risks required to challenge incumbents in the AI hardware market, while its partnership with OpenAI highlights the restrictive nature of AI infrastructure financing.