Etched draws funding offers at $40B to $50B valuation, sources say

Etched, the AI chip startup, is already fielding investment offers at double or more its last valuation — just a couple of months after it raised $700 million at a $21 billion valuation, according to people familiar with the company. The startup is reviewing incoming bids ranging from $40 billion from top-tier investors to $50 billion from lesser-known backers, one person said. The fundraising talks are early, so terms of any eventual deal may change. Etched declined to comment.

The fast timetable reflects the cost of the segment Etched is pursuing: building full AI hardware systems powered by its own proprietary chips. A person familiar with the offers said that if Etched raises as much as it did in its last round, the new funding could give it a cushion of as much as 3.5 years of runway.

Investors have several reasons to want a piece of Etched. The four-year-old startup shows promise of challenging Nvidia. Quant trading firm Jane Street not only led the last $700 million round but is also a customer that has taken delivery of an early system. Etched said in July that it had already secured $1 billion in customer orders, including Jane Street’s, after manufacturing its test chip at a TSMC factory this summer.

Co-founder and COO Robert Wachen has told TechCrunch that investors are drawn to Etched because the company designed two new components from scratch to speed up inference, the computing process that happens after a user submits a prompt. Etched says its chips process more tokens, faster, and at a lower cost than Nvidia’s — an edge that has made them attractive to Jane Street, where a tiny speed advantage can translate into large trading profits.

The startup has also drawn investor attention for its ability to pull engineers away from Nvidia: roughly 15% of Etched’s 400-person workforce previously worked at the chip giant, according to The Wall Street Journal. Etched operates a new 10-megawatt data center in Silicon Valley and has set up a facility in Taiwan to coordinate production near TSMC. Co-founders Gavin Uberti and Chris Zhu met in an advanced math course at Harvard; Wachen, Uberti’s roommate at the time, dropped out with them to start the company.

Etched has a history of fast, steep valuation jumps: a $300 million round at a $10.3 billion valuation led by Sequoia in July, then the $700 million round at a $21 billion valuation in September. Such back-to-back rounds, which function as a single financing split into separate tranches with different valuations, have become increasingly common among the industry’s most sought-after startups.

Why it matters

A chip startup drawing $40 billion-plus offers within months of a $21 billion round signals how much capital investors are willing to commit to challengers of Nvidia’s grip on AI inference hardware.