Cerebras Systems Inc., a Californian artificial intelligence firm is looking to list in the US in 2024 at an estimated valuation of $8.0 billion.
This venture-backed company specializes in large language model training chips and claims that its product is faster than Nvidia.
Even though I would not want to make an investment in Cerebras Systems’ initial public offering, if the opportunity ever arose.
It’s a bad investment because it has several warning signs.
Explore each one in depth.
Cerebras does not have many customers
Cerebras’ customers include AstraZeneca, GSK and others.
It generates most of its revenues from one customer “G42”, which is known to have worked with China in the past. This Abu Dhabi-based customer made up 87% of the company’s revenue during the first half of 2024.
Cerebras claims that they will pursue aggressively opportunities “where AI acceleration can be used to address computational bottlenecks”. But so far, it’s not been able deliver.
This deal has too many hairs. David Golden, former head of technology investment banking for the biggest US bank JPMorgan Chase, said that this deal would have never made it through the underwriting committee.
Cerebras is a name that’s avoided by the big names
Cerebras does not get much attention from big players.
Barclays and Citi will be the lead underwriters of its Initial Public Offering. The tech IPO market is not dominated by either of these two historically.
This crown belongs to Goldman Sachs, and Morgan Stanley – which is why they are absent from the Cerebras transaction.
Cerebras has not signed any agreement with the Big Four (KPMG PwC Ernst & Young and Deloitte).
It could be that Andrew Feldman, the CEO of Cerebras, pleaded guilty in 2007 to circumventing financial controls while he was vice president at Riverstone Networks.
Cerebras IPO may not be a good investment for investors if big-name companies are staying on the sidelines.
Cerebras has not been profitable yet. Its latest quarter reported loss of $51 millions adds to my list of reasons for waiting and seeing and not investing in Cerebras’ upcoming IPO.
The post Why I will not invest in Nvidia’s competitor Cerebras may change as new information becomes available.
