Key Takeaways
- Cerebras (CBRS) shares declined approximately 10% during their second trading day following a spectacular 68% jump at debut, where shares priced at $185 and ended at $311.07.
- The AI chipmaker secured $5.55 billion through its initial public offering, selling 30 million shares at $185 apiece with an opening price of $350.
- Based on projected 2025 revenue of $510 million, CBRS commands a price-to-sales ratio approaching 200x — more than seven times Nvidia’s current valuation multiple.
- A massive $24.6 billion order backlog shows dangerous concentration risk, with approximately $20 billion stemming from one OpenAI cloud agreement featuring exclusivity terms and potential exit provisions.
- D.A. Davidson’s Gil Luria calculates fair value around $115 per share — roughly $25 billion total — aligning more closely with the company’s contractual backlog.
Shares of Cerebras Systems (CBRS) tumbled roughly 10% on Friday, just one trading session removed from a blockbuster market debut, as market participants reassessed the company’s stratospheric valuation amid concerns over technology limitations and customer diversity.
CBRS launched at $185 per share on Thursday, immediately jumping to $350 at the open and touching $385 before experiencing a trading pause. The stock settled at $311.07 for a remarkable 68% first-day gain. Friday morning saw shares changing hands near $279.99.
The offering generated $5.55 billion in proceeds, marking it as among the most substantial AI sector IPOs in recent years. Calculated on a fully diluted basis, the company’s market capitalization briefly exceeded $100 billion.
That represents an enormous premium for a business projecting $510 million in revenue for 2025.
At Friday’s trading levels, CBRS carries a trailing price-to-sales multiple nearing 200x. For context, Nvidia trades at approximately 27x sales. Even when factoring in Cerebras’ anticipated growth rate, the valuation disparity remains striking.
Evaluating the Technology Argument
Cerebras manufactures extraordinarily large AI chips. The company’s premier Wafer-Scale Engine 3 (WSE-3) measures 58 times larger than leading GPU alternatives and claims to execute inference operations up to 15 times faster than Nvidia-powered systems.
The performance benefits are legitimate. However, market observers highlight accompanying limitations.
D.A. Davidson’s Gil Luria emphasized that the chip’s unprecedented dimensions have thus far restricted usage to smaller, simpler model architectures. Additionally, the unique size presents production obstacles regarding yield rates — reliable mass production for extensive deployments remains unverified.
“While the system may offer superior speed for certain use cases, it lacks the versatility of existing AI compute infrastructure,” Luria observed.
CEO Andrew Feldman countered these concerns, informing Barron’s that Cerebras currently supports larger models in private deployments and plans public demonstrations within weeks.
Concentration Risk in the Order Book
Cerebras disclosed a $24.6 billion contracted backlog as of year-end 2024. Management anticipates converting approximately $3.7 billion into recognized revenue across 2026 and 2027.
The critical issue lies in the composition. Roughly $20 billion of that pipeline — exceeding 80% — originates from a solitary cloud infrastructure agreement with OpenAI.
This arrangement contains exclusivity provisions that may restrict Cerebras from pursuing contracts with competing frontier AI laboratories. The agreement also incorporates exit mechanisms allowing cancellation in case of execution delays, potentially erasing significant backlog value.
Luria established a valuation estimate around $25 billion for the enterprise — translating to approximately $115 per share — derived primarily from the backlog calculation.
Cerebras maintains relationships with prominent AI industry players, including OpenAI, Amazon Web Services, Meta, and IBM.
Revenue expanded 96% year-over-year to $171 million in the latest reporting period. By comparison, Nvidia’s data center segment generated $62.13 billion in its most recent quarter, representing 75% growth.
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