Graphcore, the British microchip champion, is reportedly considering a sale to foreign owners as it struggles to capitalize on the artificial intelligence boom. The company has been in talks with major tech companies to secure new funding and potentially cover heavy losses.
Sources within the industry have revealed that Graphcore is exploring a potential deal that could be worth over $500 million. Senior investors in the Bristol-based company have significantly marked up the value of their stakes, indicating the seriousness of the potential sale.
However, any sale to an overseas bidder would likely come under review by national security officials due to the increasing scrutiny surrounding AI technology, which is considered a strategic priority. Governments and technology companies are currently investing billions to secure supplies of thousands of processors in light of the rise of AI systems such as ChatGPT.
Graphcore, which aims to challenge giants like Nvidia by specializing in AI software microchips, reported a 46% decrease in revenues and widening losses last year. The company initially sought to secure new funding through discussions with investors but faced difficulties in raising the necessary capital.
Rumored buyers for Graphcore include British microchip company Arm, Japanese tech conglomerate SoftBank, and OpenAI, the start-up behind ChatGPT. However, these companies have either declined to comment or denied involvement in any discussions.
The extent of the sale discussions and their progress remains unclear. It is possible that these discussions are ongoing alongside independent fundraising talks.
Investment fund Chrysalis, which holds a stake in Graphcore, highlighted in December that one of its portfolio companies was in the process of being sold. Shortly after, the fund more than doubled the valuation of its Graphcore stake, leading analysts to speculate that a sale of the company might be imminent. Another investor has estimated Graphcore’s valuation to be around $528 million.
Investment manager Baillie Gifford also recently doubled the valuation of its stake in Graphcore, indicating renewed confidence in the company’s prospects.
Graphcore has already raised more than $700 million in funding from investors like Microsoft and Sequoia. Its most recent funding round in late 2020 valued the company at $2.8 billion. However, the company has faced challenges in selling its “intelligence processing units,” which compete with Nvidia’s graphics processing units. Nvidia’s market value recently surpassed that of Amazon and Google’s parent company, making it one of the world’s most valuable companies.
Last year, Graphcore reported an 11% increase in losses to $204.6 million, with revenue falling from $5 million to $2.7 million. The company stated it had $157 million in cash by the end of the year and anticipated the need for additional funds by May. A going concern statement in the company’s accounts confirmed ongoing discussions with potential investors.
The boom in AI technology has compelled semiconductor companies to invest significant amounts in developing high-end chips. Graphcore, however, will need more funding to compete with the likes of Intel, Nvidia, and AMD, which are expected to spend substantial amounts on AI chip development.
To reduce costs, Graphcore has implemented staff layoffs and closed international offices. As of now, Graphcore, Baillie Gifford, and Chrysalis have declined to comment on the potential sale.
In summary, Graphcore’s exploration of a sale to foreign owners comes as the company seeks new funding to overcome heavy losses and compete in the AI chip market. The value of the potential deal is rumored to be over $500 million, with potential buyers including Arm, SoftBank, and OpenAI. The extent and progress of the sale discussions remain unclear, but senior investors have significantly marked up the value of their stakes, indicating the seriousness of a potential deal.
