The AI Chip Boom Saved This Tiny Startup. Now Worth $2.8 Billion, It's Taking On Nvidia

Forbes

Armed with a newly raised $640 million, Groq thinks it can challenge one of the world’s most valuable companies with a purpose-built chip designed for AI from scratch.  Read the full story on Forbes: https://www.forbes.com/sites/richardnieva/2024/08/05/groq-funding-series-d-nvidia/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Today on Forbes, the AI chip boom saved this tiny startup.

00:05Now worth $2.8 billion, it's taking on NVIDIA.

00:11Jonathan Ross' first inkling that something was wrong came back in February,

00:15while he was speaking to a host of Norwegian parliament members and tech execs in Oslo.

00:21Ross, the 42-year-old CEO of AI chip startup Grok,

00:25was in the middle of a demo he hoped would vitalize the languishing company.

00:29An AI chatbot that could answer questions almost instantaneously,

00:34faster than a human can read.

00:36But for some reason, it was lagging slightly.

00:39It unnerved Ross, who was pitching a Grok-powered European data center

00:43that would showcase the specialized chips responsible for those super-fast answers.

00:48He recalls, quote,

00:50I just kept checking the numbers. People didn't know why I was so distracted.

00:55The culprit was an influx of new users.

00:58A day before Ross' Oslo meeting, a viral tweet from an enthusiastic developer

01:03raving about, quote,

01:04a lightning-fast AI answer engine sent tons of new traffic to the online demo,

01:09buckling the company's servers.

01:11It was a problem, but a good one to have.

01:15To clear up any confusion, Ross' Grok, spelled G-R-O-Q,

01:20is completely different and separate from Elon Musk's AI chatbot Grok,

01:24spelled G-R-O-K,

01:26which is made by Musk's company, XAI.

01:30When Ross founded his Grok eight years ago,

01:33his idea was to design AI chips explicitly for what's known in the industry as, quote,

01:38inference, the part of artificial intelligence that mimics human reasoning

01:42by applying what it's learned to new situations.

01:46It's what enables your smartphone to identify your dog as a corgi in a photo

01:49it's never seen before,

01:51or an image generator to imagine Pope Francis in a Balenciaga coat.

01:56It's quite different than AI's other computational suck,

01:59training the massive models to begin with.

02:02But until OpenAI released ChatGPT in late 2022, touching off a global AI frenzy,

02:09the demand for super-fast inference was limited

02:12and the company was limping along.

02:14From inside the startup's semiconductor lab in San Jose, California,

02:18Ross recalls one low point in 2019 when the startup was a month away from running out of money.

02:24He says, quote,

02:25Grok nearly died many times.

02:27We started Grok maybe a little bit early.

02:31But now, with the demand for computational power to build and run AI models so intense

02:37that it's contributing to a global electricity shortage,

02:40Grok's time has seemingly come,

02:42either as a potential noisemaker or acquisition target for the legacy chip giants.

02:48On Monday, the company exclusively told Forbes

02:51it raised a monster Series D round of $640 million,

02:55vaulting it to a $2.8 billion valuation,

02:59up from $1.1 billion in 2021.

03:03The round, led by BlackRock private equity partners,

03:06also includes Cisco Investments and the Samsung Catalyst Fund,

03:10a venture arm of the electronics giant that focuses on infrastructure and AI.

03:15The need for compute power is so insatiable

03:18that it has spiked NVIDIA's market cap to $3 trillion on 2023 revenue of $60.9 billion.

03:25Grok is still tiny by comparison,

03:28with 2023 sales as low as $3.4 million

03:32and a net loss of $88.3 million.

03:36This, according to financial documents viewed by Forbes.

03:40With the AI chip market expected to hit $1.1 trillion by 2027,

03:45Ross sees an opportunity to snag a slice of NVIDIA's staggering 80% share

03:50by focusing on inference.

03:53That market should be worth about $39 billion this year,

03:56estimated to balloon to $60.7 billion in the next four years,

04:01according to the research firm IDC.

04:04Ross says, quote,

04:05Compute is the new oil.

04:09Challengers like Grok are bullish

04:10because NVIDIA's chips weren't even originally built for AI.

04:15When NVIDIA CEO Jensen Huang debuted its graphics processing units, or GPUs, in 1999,

04:22they were designed to run graphic-intensive video games.

04:25It was serendipitous that they've been the best-suited chips to train AI.

04:30But Grok and a new wave of next-gen chip startups see an opening.

04:35For full coverage, check out Richard Nieves' piece on Forbes.com.

04:40This is Kieran Meadows from Forbes.

04:43Thanks for tuning in.

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