Big bets on AI open up a new frontier for chips

FOR years, tech industry financiers showed little interest in startup companies that made computer chips.

How on earth could a startup compete with a goliath like Intel, which made the chips that ran more than 80 percent of the world’s personal computers? Even in the areas where Intel didn’t dominate, like smartphones and gaming devices, there were companies like Qualcomm and Nvidia that could squash an upstart.

But then came the tech industry’s latest big thing – artificial intelligence. AI, it turned out, works better with new kinds of computer chips. Suddenly, venture capitalists forgot all those forbidding roadblocks to success for a young chip company.

Today, at least 45 startups are working on chips that can power tasks like speech and self-driving cars, and at least five of them have raised more than $100 million from investors. Venture capitalists invested more than $1.5 billion in chip startups last year, nearly doubling the investments made two years ago, according to the research firm CB Insights.

The explosion is akin to the sudden proliferation of PC and hard-drive makers in the 1980s. While these are small companies, and not all will survive, they have the power to fuel a period of rapid technological change.

It is doubtful that any of the companies fantasise about challenging Intel head-on with their own chip factories, which can take billions of dollars to build. ( The startups contract with other companies to make their chips.) But in designing chips that can provide the computing power needed by machines learning how to do more and more things, these startups are racing toward one of two goals: Find a profitable niche, or get acquired. Fast.

By the summer of 2016, the change was apparent. Google, Microsoft and other internet giants were building apps that could instantly identify faces in photos and recognise commands spoken into smartphones by using algorithms, known as neural networks, that can learn tasks by identifying patterns in large amounts of data.

Nvidia was best known for making graphics processing units, or GPUs, which were designed to help render complex images for games and other software – and it turned out they worked really well for neural networks, too. Nvidia sold $143 million in chips for the massive computer data centres run by companies like Google in the year leading up to that summer – double the year before.

Many believe this is one of those rare opportunities when startups have a chance against entrenched giants. The first big change will most likely come in the data centre, where companies like Graphcore and Cerebras, which has been quiet about its plans, hope to accelerate the creation of new forms of AI.