Co-founders Simon Knowles, left, and Nigel Toon at Graphcore’s office in Bristol © Gareth Iwan Jones/FT

Graphcore, the UK-based maker of artificial intelligence chips, has raised $222m in new funding as it braces itself for tougher competition from US rival Nvidia.

The latest round values Graphcore at $2.5bn (without including the new capital raised), up from $1.5bn two years ago, making it one of the UK’s most valuable private tech companies.

Graphcore’s chips — called “intelligence processing units” — are tailored to AI’s specialised data processing requirements. Its IPUs are sold, often through partners such as Microsoft, Dell and Atos, to researchers at Imperial College London and the University of Oxford, as well as financial, healthcare and telecoms institutions.

Nigel Toon, Graphcore’s co-founder and chief executive, said a stronger balance sheet would build confidence among customers and partners after revenue growth was hit by customer purchasing delays this year.

Researchers at Facebook and Google have published papers comparing the performance of IPUs favourably with the graphics processing units most commonly used in AI today. Nvidia has become the leader in GPUs and overtook Intel to become the most valuable US chipmaker this year.

Mr Toon slammed Nvidia’s planned $40bn acquisition of UK-based chip designer Arm from SoftBank as “bad for competition”, “bad for the market overall” and “bad for Britain”.

Chipmakers such as Graphcore would be less willing to work with Arm knowing that it was owned by a competitor, he said, limiting access to its “world-class” processor designs.

Graphcore’s latest financing is led by Ontario Teachers’ Pension Plan Board, along with funds managed by Fidelity International and Schroders, who are all new investors to the Bristol-based company. Some existing investors, including Draper Esprit and Baillie Gifford, also participated.

The new funding comes less than a year after Graphcore closed a $150m extension to its last round and leaves the four-year-old company with about $440m in cash.

“We don’t need to raise any more money anytime soon,” Mr Toon said. “The next step for us probably would be an IPO [initial public offering] of the business at some point, when things are much more predictable in our business.”

There would be no stock market listing in 2021, he added, which would be focused on “growing the company”.

Despite disruption from the coronavirus pandemic, Graphcore launched its second-generation IPU processor on schedule this year, Mr Toon said, with volume production beginning in the fourth quarter.

Graphcore invested $41.8m in research and development in 2019 and since then its headcount has increased further to 450 people. Its annual report for 2019 shows a pre-tax loss of $95.9m, up from $60.3m in 2018, with revenues of $10.1m.

Mr Toon said sales growth this year had fallen short of expectations. “Revenues have not been at the level we had hoped because things have taken longer to come to fruition and some projects have been delayed,” he said.

But Graphcore has built a “phenomenal” pipeline of new customers, he added, which helped win over the new investors. “We’re very hopeful that 2021 is going to be a very strong revenue year.”

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