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Graphcore, the UK chip designer that became one of the country’s most valuable private technology companies in 2020, has warned it needs to raise new funds from investors within months after reporting falling revenue and increased losses last year.

The need to raise new capital by next May represents a “material uncertainty” over its ability to continue as a going concern, Graphcore said in its latest accounts.

Bristol-based Graphcore has raised more than $600mn from investors, according to deal tracker PitchBook, and was valued at around $2.5bn in 2020, as it pitched itself as an alternative to Nvidia’s specialised chips for artificial intelligence applications.

However, it was dealt a blow in 2020 when Microsoft, an early investor, opted not to continue using Graphcore’s chips in its cloud computing platform.

Despite making technical advances, Graphcore has struggled to win large-scale corporate customers and was forced to make lay-offs late last year.

Accounts filed at the UK’s Companies House registry this week showed that Graphcore’s revenues in 2022 fell 46 per cent to $2.7mn, which it blamed on “headwinds in the wider macroeconomic environment” and delayed hardware purchasing by “key strategic customers”, including a “major” buyer in China.

Pre-tax losses rose 11 per cent to $204.6mn, leaving it with $157mn in cash at the end of the year.

The company’s cash flow forecast “indicates that there will be a need for further funding” before reaching break-even, Graphcore said in its accounts.

“The forecast indicates that the group and company will require further investment to finance the existing requirements over the 12 months from the date of signing these financial statements [in May 2023],” it added.

Graphcore said discussions with potential investors had not yet reached agreement, but the company’s directors “expect that appropriate funding can be secured before it is required”.

The accounts were prepared on a “going concern” basis, as auditors PwC signed off on Graphcore’s ability to continue operations.

But the company’s directors warned that the need to raise additional funding and hit its revenue and cost forecasts raised a “material uncertainty in relation to going concern”.

Graphcore declined to comment on the status of its fundraising talks.

Graphcore’s “intelligence processing units” are designed for the specialised data processing requirements of AI applications.

It claimed in the accounts that its customers report “industry-leading performance and efficiency” and it was “investing heavily” in the next generation of its IPU chips.

However, the AI processor market is dominated by Nvidia, whose A100 and H100 chips have become one of the most sought-after commodities in Silicon Valley.

Graphcore said it was reorienting its business towards deploying its IPU chips in cloud computing environments, as the AI boom had accelerated a shift away from companies using their own data centres.

“Graphcore has moved rapidly to position itself ahead of this emerging need and is seeing excellent traction that will drive future revenue,” it added.

“As both AI generally and the commercial AI cloud compute opportunity continues to grow apace, Graphcore is well-positioned to capitalise on this vast opportunity in coming years.”

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