Graphcore increases losses and seeks new capital from investors

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Graphcore, the chip designer based in the UK, has emerged as one of the most valuable private technology companies in the country. However, after experiencing a decline in revenue and increased losses last year, the company has signaled the need to raise new funds from investors within the next few months. This requirement is considered a “material uncertainty” regarding Graphcore’s ability to continue operating.

Graphcore has successfully secured over $600mn in investments, making it a significant player in the market. It aimed to provide an alternative to Nvidia’s specialized chips for artificial intelligence applications and was valued at around $2.5bn in 2020. Unfortunately, Microsoft, an early investor, decided not to continue using Graphcore’s chips in its cloud computing platform, which had a negative impact on the company. Despite making technical advancements, Graphcore has struggled to attract large-scale corporate customers and had to lay off employees in late 2020.

According to the recently filed accounts at the UK’s Companies House registry, Graphcore’s revenue in 2022 fell by 46% to $2.7mn. It attributed this decline to “headwinds in the wider macroeconomic environment” and delayed hardware purchasing by “key strategic customers,” including a major buyer in China. Pre-tax losses also increased by 11% to $204.6mn, leaving the company with $157mn in cash at the end of the year.

The company’s cash flow forecast indicates the need for additional funding before reaching break-even, as stated in its accounts. Although discussions with potential investors are ongoing, Graphcore’s directors anticipate securing the necessary financing before it becomes imperative. Auditors PwC have endorsed the company’s ability to continue operations by signing off on its “going concern” basis in the filed accounts. However, the directors cautioned that the need for additional funding and achieving revenue and cost forecasts pose a “material uncertainty in relation to going concern.” Graphcore has opted not to disclose further information about its fundraising talks at this time.

Graphcore’s “intelligence processing units” are specifically designed for AI applications’ complex data processing requirements. The accounts highlight that the company’s customers report industry-leading performance and efficiency, and Graphcore is fervently investing in the next generation of its IPU chips.

However, Nvidia dominates the AI processor market with its highly sought-after A100 and H100 chips in Silicon Valley. In response, Graphcore plans to reorient its business towards deploying its IPU chips in cloud computing environments. The company believes that the AI boom has expedited a shift away from individual data centers towards cloud computing. Graphcore stated that it is rapidly positioning itself to meet this emerging need and is experiencing significant traction that will drive future revenue. As AI continues to grow, Graphcore is confident in its ability to capitalize on the vast opportunities the market presents.