The rise of AI-powered artificial intelligence has greatly increased the demand for high-performance graphic chips, with NVIDIA being the dominant player in the market. This has had a significant impact on smaller chip companies, particularly startups.
According to PitchBook data, VC investments in chip-focused startups in the development and design space have decreased to a total of $881.4 million in the past 8 months of this year, compared to $1.79 billion in the first 9 months of 2022. Furthermore, the number of deals has significantly decreased from 23 deals to only 4 deals this year.
Greg Reichow, a partner at Eclipse Ventures, commented on NVIDIA’s market dominance and the increasing difficulty for smaller companies to find entry points into the market. As a result, VCs tend to hesitate or withdraw their investments in these companies.
Examples of chip design-focused startups that received investments in the past year include Tenstorrent, whose CEO has a background in chip design for Apple, AMD, and Tesla, as well as D-Matrix, a company that specializes in AI chip development and has received funding from Microsoft.
TLDR: The increasing demand for AI-driven technology has led to a significant surge in the need for high-performance graphic chips. NVIDIA has emerged as the dominant player, impacting smaller chip companies and leading to a decrease in VC investments in chip-focused startups. Despite the challenges, certain startups, such as Tenstorrent and D-Matrix, have managed to secure investments due to their expertise and focus on chip design.