Investors cannot get enough AI-related supplier investments. After Micron (MU), Sandisk (SNDK), Intel (INTC), and Marvell (MRVL) rewarded investors, Nebius (NBIS) soared on Wednesday, too. The hyperscaler reported strong revenue growth.
On that backdrop, Cerebras Systems (CBRS) is primed to soar when it lists publicly. Its initial public offering is attracting orders that are 20 times the number of shares available. The limited supply against excess demand let the chip maker price its stock at $185.
The higher price will increase the cash raised to around $4.8 billion. Cerebras will sell 30 million shares, up from 28 million.
Cerebras had the option to get bought out before the IPO. Bloomberg reported that Arm Holdings (ARM), which is majority owned by Softbank Group (SFTBY), offered a buyout.
Risks
Investors should stay away from this IPO. The valuation is excessive, created by a short-lived shortage in shares. When the dust settles, markets will set a valuation that adjusts for a balanced demand/supply dynamic.
The $55 billion valuation is on a weak basis. The firm has a loose deal with OpenAI. That sets a price/sales ratio of around 100 times.
Your Takeaway
To trade higher from its IPO price on day 1, Cerebras needs to report consistent revenue growth quarter after quarter. It needs the shortage in AI chips to continue beyond a year. If the shortage ends, CBRS stock might trade sharply lower.
