U.K. artificial intelligence chip startup Graphcore Ltd. is reportedly exploring a sale as it has struggled to compete with the likes of Nvidia Corp. in the booming AI chip market.

The Telegraph reported Saturday that Graphcore has been discussing a potential deal with major tech companies to raise new funding to cover heavy losses. A potential deal could see the company valued at more than $500 million but would be subject to a review by U.K. national security officials, given the ongoing scrutiny and concerns around AI technology.

Graphcore, which last raised $222 million in funding on a $2.77 billion valuation in December 2020, builds AI chips such as the Bow IPU that debuted in March last year. The Bow IPU processor, designed in conjunction with TSMC Ltd., is a wafer-on-wafer design that can manage up to 350 trillion processing operations per second.

The company sells the processors as part of a computing system dubbed the Bow-2000 IPU Machine. Each system includes four Bow IPU processors that provide 1.4 petaflops of processing capacity. One petaflop equals a quadrillion computing operations per second.

Customers who require extra processing power can combine multiple Bow-2000 IPU Machines into clusters called Bow Pods, which feature between 16 and 1,025 processors. It was claimed at the time of their debut that the 16-processor Bow Pod provides more than five times the performance of a comparable DGX A100 appliance from Nvidia Corp. at half the cost.

While Graphcore’s offering sounds appealing on paper, the company has struggled to keep up with new developments in AI chip design, with Nvidia regularly releasing new and more advanced chips, such as the RTX 2000 Ada Generation GPU on Feb. 12. Put more simply, the rapid pace of AI chip development needs lots of money and Graphcore’s pockets are not that deep.

The Telegraph report also notes that Graphcore has allegedly held discussions with investors about raising additional funds but couldn’t do so. Further, it’s also claimed that the company was expected to have closed a new round in the third quarter of last year, but no funding round was disclosed.

Potential buyers for Graphcore include U.K. semiconductor and software design company Arm Holdings plc, Japanese tech giant SoftBank Group Corp. and, interestingly, Open AI.

Further evidence that a sale may be in the works is the reported action of Chrysalis Investments Ltd., an investment fund with a stake in Graphcore, which said in December that a company in its portfolio was in the process of being sold. Weeks later, the company doubled the valuation of its stake in Graphcore, taking the valuation of Graphcore to $528 million after having previously written the valuation down. A valuation usually doesn’t get revised unless something is in the works.

Photo: Graphcore