NVidia’s Supremacy in AI Chip Market Affects New Star-ups

AI chip investors in the US pull back on investments as NVidia maintains dominance in the AI chip market. Data from PitchBook reveals that the revenue of the US AI Chip startups declined in 2023.

The startups realized $1.79 billion between January and September 2022 but only obtained $881.4 million from January to August 2023.

AI Chip Startups Revenue Drop Amid Decline in Investor Sponsorships

Brendan Burke, a PitchBook analyst, reveals that investors' sponsorship of new AI startups has dropped to $100 million in 2023 from the $200 to $300 million recorded in the past two years.

According to a report, Greg Reichow, a member of Eclipse Ventures, asserted that NVidia's persistent dominance in the AI chip market prevents startups from thriving.

He noted that this dominance impeded investors' sponsorships to new startups in the AI chip business. Again, a recent report also shows that US investor-to-business deals have declined by 80% in Q3 2023 from what it was in the past two years.

Moreover, PitchBook data also shows that the rate of investor-to-business deals has fallen from 23 to 4 in August 2023. This decline in investments could be linked to the recent investors' behavior toward upcoming tech firms in the AI chip market due to NVidia's prominence.

Given the decline in investor sentiment, the advancement of startups in AI chip development and research activities has been impaired. The reason is that most startups lacked enough access to more funds since it costs over $500 million to develop an AI chip for a working prototype.

It's worth mentioning that NVidia, the leading California-based multi-national tech company, has maintained supremacy over the AI chip market since 2017.

NVidia's Dominance Obstructs Investors from Sponsoring New AI Chip Startups

In another report, Dave Rick, CEO of Mythic, an AI chip startup, blamed NVidia for the recent investors' pullback from AI chip investment. His reason was that the investors were interested in domestic investments with a high potential for ROI.

Rick also pointed fingers at the recent economic downturn, alleging that it is one of the factors that affected the cyclical semiconductor market and its startups. Notably, Mythic was one of the affected AI chip startups.

A report shows that it realized $160 million in fundraising but went bankrupt last year, 2022. This ordeal almost crippled the firm's business operations. However, in March 2023, the firm raised a reasonable amount in investment, recording about $13 million to resume its operations.

According to Reuters' report, Rivos, an AI chip startup that designs chips in data servers, also faced fundraising challenges. Rivos' spokesperson also blamed NVidia's chip market supremacy as a factor that impaired its efforts in raising funds for software and hardware.

Reports show that AI investors require AI chip startups to have products within a few months after launch or make reasonable sales. However, despite these demands, two startups succeeded in getting investment deals as they announced their investors-to-business deals with some notable executives.

Furthermore, D-Matrix also received an investment of $110 million from Microsoft in the past week. The firm is projected to generate a revenue below $10 million at the end of this year, 2023.

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