Nvidia’s AI chip rival Etched issued a progress update on Tuesday, following TSMC’s successful manufacturing of its chip earlier this year. The startup claims it has already secured $1 billion in contract orders for its product—full systems powered by those chips. Etched is currently testing its first product with customers. The company calls these systems “frontier inference clusters,” bundles that include the chips along with custom-designed racks and software. According to Etched, these systems are designed to help frontier models run inference faster, more cheaply, and with better power efficiency than competitors. (Inference occurs after a user submits a prompt—it’s currently the biggest bottleneck and cost center for AI companies trying to serve customers at scale, which is why investors are paying close attention to anyone promising to solve it.)

Founded in 2022, Etched also revealed that it has raised a total of $800 million to date. The most recent tranche was an unannounced $500 million round closed in December at a $5 billion post-money valuation, the company said. The startup has attracted a notable group of investors, including VentureTech Alliance, Jane Street, Hudson River Trading, Two Sigma, and Ribbit Capital. It has also secured angel investment from AI heavyweights such as Andrej Karpathy, Geoffrey Hinton, Fei-Fei Li, Arthur Mensch, and Scott Wu. The cap table also includes billionaires Stanley Druckenmiller and Peter Thiel. By 2024, Etched was already on investors’ radar, having raised more than $125 million. However, on Patrick O’Shaughnessy’s “Invest Like the Best” podcast, the founders said that back in 2023, they struggled to get investors interested—even with a 30-page memo arguing that AI would eventually need specialized chips, not just general-purpose GPUs. Every major investor they pitched passed. The company was reportedly operating month-to-month, close to running out of cash, in those early days.

Today’s funding environment looks like a different planet by comparison. Investors are chasing everything AI-related, especially chip technology that speeds up inference. Competitor Cerebras had the first breakout IPO of the year, while AI chip maker Groq just raised $650 million. Hyperscalers Amazon, Google, and Microsoft all build their own in-house AI chips. Even OpenAI just announced its first custom chip, built by Broadcom.