UK-based chipmaker Graphcore has raised an extra $150 million as it goes toe-to-toe with industry rivals buffeted by the US-China trade war.
The new funding round—comprising investments from Mayfair Equity Partners, Baillie Gifford and Amadeus Capital Partners—values the company at $1.95 billion. The deal is an extension of its $200 million Series D, which was co-led by Atomico and Sofina in 2018.
Based in Bristol, a semiconductor hub, Graphcore is a lead developer of AI microchips designed for use in a variety of applications, from voice recognition to self-driving cars. Its clients include Citadel Securities and French search engine Qwant, as well as Microsoft, which launched Graphcore’s chips on its Azure software last year. This latest investment will go toward research and development, as well as helping to expand the business’ sales and engineering centers.
The market for AI semiconductors is expected to grow exponentially in the next couple of years. Global revenue in the space is estimated to surpass $30 billion by 2022, up from 2018’s $6 billion, according to a report released last year by PwC. Established chipmakers such as Intel, Nvidia and Qualcomm have been pursuing their own AI chips for years, along with tech giants Apple, Google and Huawei.
The technology is also being developed by several VC-backed startups like China’s Cambricon Technologies and California-based Cerebras, and investors are taking notice. Since 2016, about 22% of the total number of VC investments in the semiconductor and computer hardware space were related to AI, according to PitchBook data. Deal count has been increasing, with 175 transactions in 2019 compared with 168 in 2018, while deal value has fluctuated, decreasing from $3.5 billion in 2018 to $2.5 billion last year.
European chipmakers in particular are set to grow their share of the international market as their US-based counterparts deal with the impact of the ongoing US-China trade dispute. Export restrictions on Chinese entities such as Huawei has inflicted collateral damage on American semiconductor companies, according to a January report from global trade advocate Hinrich Foundation.
The continued animosity between the countries could potentially lead to a decoupling of American companies from the Chinese market, which is by far the world’s largest importer of semiconductor technologies—and Graphcore may be able to bridge the gap.
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