Etched, an AI Chip Startup, Secures $500M Funding, Valued at $5B

Etched: A Silicon Valley Startup Taking on Nvidia with Specialized AI Processors

Etched, an AI chip startup, has successfully raised an impressive $500 million in a new funding round. The round was led by investment firm Stripes, which has now valued the San Jose-based company at a staggering $5 billion, according to sources familiar with the matter. The funding round, announced on January 13, 2026, saw participation from billionaire entrepreneur Peter Thiel, Positive Sum, and Ribbit Capital. This has brought Etched’s total funding to nearly $1 billion.

The company has been diligently developing an AI chip named Sohu. This chip is designed to capitalize on the skyrocketing demand for computing power used to train and run artificial intelligence models. Etched’s specialized approach focuses on building inference hardware optimized to run transformer models more efficiently than general-purpose GPUs. This targets a market currently dominated by Nvidia.

Etched has partnered with Taiwan Semiconductor Manufacturing Co.’s Emerging Businesses Group for production. The company has also recruited engineers with experience from established chipmakers including Cypress Semiconductor and Broadcom. Etched’s strategy is based on delivering meaningful performance-per-watt gains for specific model classes. This could prove crucial as power constraints become the limiting factor in data center expansion.

The funding arrives as Nvidia continues to dominate the AI accelerator market. The company is projecting more than half a trillion dollars in sales from data center operators by the end of 2026. However, the massive capital raise for Etched underscores how quickly investors are backing alternatives. This is especially true as demand shifts from training-only capacity to always-on production inference across enterprise applications and AI agents.

Source: Bloomberg