How to Invest in Cerebras Pre-IPO

Proclaiming itself the "pioneer" in generative artificial intelligence (AI), Cerebras and its stock have drawn increasing attention from AI investors, engineers, and aficionados. In March 2024, Cerebras introduced the Third Generation 5nm Wafer Scale Engine, or WSE-3, which the company claims is the fastest AI chip. It's no wonder Cerebras is garnering considerable interest from the AI community.

With Open AI's launch of ChatGPT in late 2022, generative AI exploded onto the scene. Now, it and other generative AI models are becoming increasingly present in our daily lives. It's hardly expected to slow down. According to Bloomberg Intelligence, the generative AI market is projected to grow from about $40 billion in 2022 to over $1.3 trillion in 2032 -- a compound annual growth rate (CAGR) of almost 42%.

In addition to several government laboratories, Cerebras has a variety of customers operating in the private sector. The Mayo Clinic, for example, has turned to Cerebras for assistance in developing AI models for healthcare.

Financial details of the relationship are scarce, but Cerebras CEO Andrew Feldman identified the deal as a "multi-million-dollar" arrangement. Oil supermajor TotalEnergies (TTE -0.22%) has also enlisted Cerebras to help with seismic modeling.

While investors may be motivated to add Cerebras to their portfolios, there are important things to take into account. Besides looking at how to buy shares of Cerebras stock, investors will want to consider when the company plans to hold its initial public offering (IPO) and whether alternative investment opportunities exist.

Publicly traded?

Is Cerebras publicly traded?

Cerebras has held several funding rounds that have helped it to raise capital from investors like the Abu Dhabi Growth Fund and venture firm Benchmark Capital. After completing a Series F round in 2021, Cerebras had raised about $715 million in funding, according to Crunchbase.

Most individual investors, however, don't have the same opportunity to gain Cerebras exposure. As of April 2024, Cerebras was not a publicly traded company.

When will it IPO?

When will Cerebras IPO?

Although 2023 saw a slowdown in the number of companies holding IPOs compared to previous years, some pundits predict an increase in IPO activity during 2024. While Cerebras is not officially on the calendar to hold an IPO, there is speculation that the company is looking to debut on the public markets in 2024.

According to reporting from Bloomberg News, Cerebras has chosen Citigroup (C 1.29%) to help it with the IPO, which the company may pursue as soon as the second half of 2024. So, investors may soon have the opportunity to click the buy button on this IPO stock. Consistent with its latest round in 2021, Cerebras may seek a valuation in excess of $4 billion.

How to buy

How to buy Cerebras stock

For most investors, picking up shares of Cerebras is not possible. People who qualify as accredited investors, on the other hand, may be able to buy Cerebras stock before its IPO. Some platforms, like Forge Global (FRGE 3.82%), allow accredited investors to buy shares of pre-IPO companies like Cerebras.

While people who don't qualify as accredited investors may be unable to buy Cerebras stock, that doesn't mean they're completely out of luck. There are a variety of other AI stocks for them to consider. Here's a four-step guide on how to buy stocks.

Step 1: Open a brokerage account

Buying stocks is a great step toward building personal wealth. To get started, investors must open a brokerage account. Many options are available, but inexperienced investors may want to consider Fidelity, which offers zero-commission online trades.

Step 2: Figure out your budget

People with substantial experience know that creating a budget is integral to successful investing. Maybe you have an ample pile of cash to begin investing. Maybe you plan to start with just a few bucks. Whatever the case, it's critical to assess your financial situation and determine an appropriate budget.

Step 3: Research related companies

While the average investor waits for Cerebras to hold its IPO and become an option for them, there are several other stocks they may find worthy of buying now.

1. Nvidia

One of the most obvious alternatives for prospective Cerebras investors is AI stalwart Nvidia (NVDA -1.66%), arguably Cerebras' most formidable competitor. With its Hopper Tensor Core GPU (graphic processing units), Nvidia was already an industry leader in supporting AI computing.

However, Nvidia upped its AI game in March 2024 with its X800 series network switches. The company characterizes the X800 switches as "end-to-end networking platforms that enable us to achieve trillion-parameter-scale generative AI essential for new AI infrastructures."

Despite its commanding position -- the company's market capitalization exceeded $2.2 trillion in April 2024 -- there's still a general consensus among investors that Nvidia has plenty of opportunities for growth ahead of it. That's something that likely appeals to investors also interested in Cerebras.

And since it generates massive amounts of cash, it represents an AI investment opportunity at the lower end of the risk spectrum. In fiscal year 2024, for instance, Nvidia reported free cash flow of $26.9 billion.

2. Qualcomm

Instead of a competitor, investors may feel more compelled to pick up shares of a collaborator. Qualcomm (QCOM 1.48%), for example, has partnered with Cerebras, making a way for investors to indirectly gain exposure to the privately held company.

In March 2024, Cerebras announced it had selected Qualcomm's Cloud AI 100 Ultra, an AI inference card designed specifically for generative AI and large language models, to be used with its CS-3 AI accelerators for training to provide a superior AI solution.

To simply brand Qualcomm an AI company would be giving it short shrift. As a leading semiconductor company, Qualcomm provides wireless solutions found in numerous applications, including smartphones, vehicles, and devices operating on the Internet of Things.

The company has a variety of available growth opportunities. While investors wait for these to play out, they can reap the rewards of the company's dividend, which had a forward yield of 1.9% as of April 2024.

3. Astera Labs

Instead of waiting for Cerebras to hold its IPO, investors can opt for an AI-oriented semiconductor stock that recently held its IPO -- a stock like Astera Labs. Making its way to publicly traded markets in March 2024, Astera Labs offers its Intelligent Connectivity Platform to meet the connectivity demands of AI and cloud infrastructures. Already, the company has secured some industry leaders as customers.

Raghu Nambiar, Advanced Micro Devices' (AMD -7.1%) vice president for data center ecosystems and solutions, said: "Close collaboration with Astera Labs on PCIe technologies [connections for high-bandwidth communication] ensures our customers' platforms continue to meet the higher bandwidth connectivity requirements of next-generation AI and HPC [high-performance computing] workloads." Intel (NASDAQ:INTL) and Nvidia also use solutions from Astera Labs.

The company posted revenue of $115.8 million and a net loss of $26.3 million in 2023.

Step 4: Place an order

You're almost at the finish line -- just some final decisions to make. For one, you'll have to decide how many shares you'd like to buy. Next, you'll have to choose the type of order you want to make: a market order or a limit order. Finally, click the buy button and celebrate the step you've just taken toward building your personal wealth.

Profitability

Is Cerebras profitable?

As a privately held company, Cerebras isn't subject to the same requirements as publicly traded companies, which are required to submit regulatory filings. Given the sparse information available about Cerebras' finances, it's difficult to determine whether the company is generating a profit.

If the company launches an IPO, investors will gain much greater insight into the company's financial health when they get to dig through the company's prospectus, also known as an S-1.

Should I invest?

Should I invest in Cerebras?

Cerebras is a privately held company, so it is not an investing option for most people. If the speculation surrounding its 2024 IPO rings true and the stock becomes available for retail investors, Cerebras will have to submit regulatory filings, giving investors a peak at its financials. At that point, it will be easier to assess the company's financial health and determine whether the stock is a good fit.

Accredited investors may be able to gain exposure to Cerebras currently. But even for them, a position in Cerebras carries a fair degree of risk, so they must be comfortable with a more speculative investment.

ETF options

ETFs with exposure to Cerebras

Cerebras isn't publicly traded, so investors can't gain exposure to the company through an exchange-traded fund (ETF). But other options exist. There are several artificial intelligence (AI) ETFs that may interest investors.

• Vanguard Information Technology ETF (VGT 0.58%): Don't let the name fool you. Though AI isn't specified in the ETF's name, the fund has plenty of AI exposure. Nvidia is the ETF's third-largest holding; Broadcom (AVGO -2.23%) and Advanced Micro Devices are the second- and third-largest holdings, respectively. The ETF has a low expense ratio of 0.1% and makes quarterly distributions.
• Roundhill Generative AI & Technology ETF (CHAT -0.85%): Branding itself the "world's first Generative AI ETF," this ETF may be an ideal option for investors frustrated that they can't buy Cerebras stock. After Nvidia, the ETF's largest holding, OpenAI partner Microsoft (MSFT 2.7%) represents the ETF's next-largest position. Combined, Nvidia and Microsoft account for more than 15% of the ETF's portfolio, which has 43 holdings and a 0.75% expense ratio.
• Global X Artificial Intelligence & Technology ETF (AIQ 1.26%): With 84 holdings in its portfolio, this ETF provides a broader approach to AI. In addition to holding companies that produce hardware catering to AI, the ETF aims to invest in "companies that potentially stand to benefit from the further development and utilization of artificial intelligence (AI) technology in their products and services." Besides top holdings Nvidia, Broadcom, and Qualcomm, the ETF includes Meta Platforms (META 3.79%), Netflix (NFLX 1.34%), and Amazon (AMZN 4.42%) in its top holdings, with a 0.68% total expense ratio.

Related investing topics

The bottom line on Cerebras

In light of the massive growth that the generative AI market is expected to experience over the next decade, it's unsurprising that investors have Cerebras on their radar. While the company has achieved noteworthy success, it's unclear how this success has translated to the company's financial health -- something investors will have a better sense of if the company proceeds with its plans to hold an IPO. In the meantime, investors have a variety of other AI stocks and ETFs they can consider.

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