A series-A fundraising round worth $120 million was raised by artificial intelligence (AI) firm Etched. The funds will be used to advance the development of the company's specialized chip.

Positive Sum and Primary Venture Partners led a $120 million funding round for the San Francisco-based firm.
The firm is the inventor of Sohu, a transformer-specific AI processor that is used to train and implement huge language models, the foundation of generative artificial intelligence.

To develop the chip, Etched has partnered with Taiwan Semiconductor Manufacturing Co. The chip will directly compete with Nvidia, the industry leader in chips.

But Etched thinks it can make a quicker, more affordable, more energy-efficient microprocessor. AI's high energy consumption is still a worry.

The most recent chip startup with significant funding is Etched. After a forgettable 2023, venture financing for semiconductor chips looks to be well on its way to recovering this year.

Nvidia holds over 80 percent of the market share for server AI chips. Although Nvidia's general-purpose AI chips can handle a variety of computational tasks, they have the potential to consume more energy than processors developed for specialized tasks. The biggest American firm by market value is Nvidia, as per reports.

According to reports, Amjad Masad, the CEO of Replit, and Peter Thiel, the former CEO of PayPal, are backers of the investment round.

The chip that will support inference—the part of AI computation that produces responses and content—is being designed by engineers at Etched. The company's first chip, which is tuned to operate a particular type of AI model called a transformer, will be installed.

Taiwan Semiconductor Manufacturing Co. and Etched have teamed up to create the chips. According to Uberti, the business needs a series of financial contributions to cover the expenses of submitting its designs to TSMC and having the chips manufactured—a procedure referred to as taping out chips.

The company kept its valuation a secret. In March 2023, the company raised $5.4 million in seed capital, with investors valuing it at $34 million.