It’s become a bit boring to hear stories of 20-something techies launching multi-billion-dollar startups from their dorms. However, these tales of online riches usually center around software.
That’s what makes Etched different.
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Gavin Uberti, Robert Wachen and Chris Zhu — a trio of math whiz Harvard dropouts — founded this San Jose startup to build next-gen AI semiconductors. Despite Etched’s youthful leaders and its short history, some experts are already saying it has a chance of chipping away at giants such as Nvidia [NASDAQ: NVDA].
What’s really got people talking about Etched’s prospects is its latest $21 billion. According to Reuters, that’s double Etched’s estimated valuation from one month ago.
Besides Jane Street, plenty of other big-name investment firms like Sequoia Capital, Andreessen Horowitz and Blackstone want an early piece of Etched. Recent reports also show Etched is having an easy time finding demand for its chips. The company says it already inked deals for its products totaling over $1 billion.
Why is everyone ecstatic about Etched?
Etched is focused on making “inference” — where a trained AI model responds to your questions or performs a task — more efficient than the now-dominant Nvidia GPUs. To do this, the company highlights two major innovations: Low voltage inference (LVI) and Cluster Scale Memory (CSM).
LVI focuses on using less electricity to keep AI chips running at high speeds without overheating, while CSM connects chips to a shared pool of memory so they can access information much faster. So, LVI helps the system work harder without getting too hot, while CSM helps it get the data it needs quicker.
According to initial reports, the so-called “frontier inference clusters” that Etched is building have already produced impressive results. For instance, The Wall Street Journal reported that Etched’s chips can perform communications tasks within 700 nanoseconds, while it takes Nvidia’s Blackwell processor 4,000 nanoseconds.
Etched also boasted that it only took 44 days to transition its test chips from Taiwan Semiconductor Manufacturing to running real AI workloads. On average, this process takes roughly 6 months, The Journal reports.
It’s this speed that has so many investors excited, including Patrick O’Shaughnessy, the founder and CEO of venture capitalist firm Positive Sum. As O’Shaughnessy told The Journal, “They move faster than anyone I’ve ever dealt with, especially in hardware, which typically moves really slowly.”
Will Etched erase Nvidia’s dominance?
All of these impressive figures have some investors wondering about Nvidia’s dominance in the AI inference market — and it’s not just about Etched’s hardware.
Since its founding, Etched has successfully poached top talent from Nvidia (as well as Google, Broadcom and SK Hynix) in its team of more than 400 employees. The Journal claims that approximately 15% of Etched’s staff came directly from Nvidia.
After reading through all of this news, famed short seller Michael Burry posted a link to The Journal’s report on X and speculated, “This is serious competition for NVDA.”
But does that mean Nvidia’s competitive edge is truly at risk? First off, remember that Burry isn’t an unbiased observer. An article in The Journal revealed that he profits from his Nvidia short positions if shares fall to $110 by 2027.
Also, a few financial analysts point out that Etched is still in its early phases and has many unanswered questions. As Cerity Partners’ Investment Strategist Michael Ashley Schulman cautioned in a Reuters interview, “Etched has impressive technology and serious customer interest, but semiconductor history is littered with brilliant chips that never became great businesses.”
Keep in mind that Etched’s technology is specialized for inference, whereas Nvidia sells a much broader computing platform that can handle both training and inference. Plus, even though Etched’s stats are impressive, it’s still competing with a company that commands a $5.3 trillion market cap.
All of that doesn’t mean Etched isn’t worth watching or that it can’t steal market share in the inference space. But right now, panicking over a long-term Nvidia position might be premature.
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This article originally appeared on Moneywise.com under the title: 3 Harvard dropouts just hit a $21B valuation with a chip they say beats Nvidia’s best. Should NVDA investors worry?
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