In August, amidst the GPU shortage in the AI industry, Andrej Karpathy from OpenAI said, “’Who’s getting how many H100s and when’ is the top gossip of the Valley right now.” To this, Stephen Balaban, CEO of Lambda Labs said, “Lambda has a few thousand more H100s coming online before the end of this year — if you need 64 H100s or more, DM me.”
NVIDIA, the H100 provider, has been in discussions with Lambda Labs about financing, though it’s unlikely to partake in the upcoming funding round. The exact reasons for NVIDIA’s decision to stay on the sidelines remain unclear. However, it’s important to note that NVIDIA has already provided substantial funding to CoreWeave in May, which is another of its partners in cloud computing.
Only NVIDIA chips
Lambda Labs and CoreWeave, these companies have become noteworthy figures in the AI realm, garnering attention from NVIDIA. As the demand for NVIDIA’s AI chips continues to soar, these startups have seized the opportunity to flourish.
NVIDIA diverts supply from AWS, Microsoft, and Google Cloud through these two companies. These tech giants are not only customers of servers equipped with NVIDIA chips but also develop their own AI server chips, competing with NVIDIA. OpenAI is also reportedly pursuing the development of its own AI chip.
However, Lambda Labs and CoreWeave differ in that they do not design their own chips. This distinction positions them as less of a threat to NVIDIA, which sees value in diversifying its customer base by supporting these emerging cloud providers. Both these companies are addressing these critical issues in the AI industry, particularly concerning the shortage of AI chips with NVIDIA.
This surge in demand has attracted the interest of investors, and it’s worth noting that a notable investment fund led by billionaire Thomas Tull is poised to contribute a significant portion of funding to Lambda Labs. While the funding round is yet to be finalised, it is expected to value Lambda Labs at a substantial $1.5 billion, factoring in the influx of new capital.
Though investors are just a little cautious, as they fear this demand may be temporary. But that is probably why NVIDIA loves these two companies.
NVIDIA’s love makes future bright
Lambda Labs, founded over a decade ago, has emerged as a formidable competitor to AWS and Google in the realm of server rentals equipped with NVIDIA chips. In recent times, the company has witnessed exponential growth, primarily due to the skyrocketing demand for NVIDIA’s AI chips.
Interestingly, Lambda Labs finds itself priced at a significant discount compared to its larger rival, CoreWeave, which is currently making strides to sell $50 million worth of employee shares. On a related note, SoftBank is reportedly also contemplating an investment in Lambda Labs.
In terms of financial outlook, Lambda Labs is poised for substantial growth. With a projected revenue of $250 million for 2023, the company’s financial performance is expected to more than double compared to the previous year. Looking ahead to the next fiscal year, Lambda Labs anticipates revenue close to an impressive $600 million.
CoreWeave is pursuing a different financial strategy. It is currently attempting to sell employee shares at a valuation of $7 billion, which is a remarkable 14 times its expected revenue of $500 million for the current year. Moreover, CoreWeave’s forward-looking projections indicate revenue expectations of $2.3 billion for the following year, demonstrating its ambitious goals in the AI space.
Many companies are turning to Lambda Labs and CoreWeave for computing capacity instead of relying on larger cloud providers. These cloud providers have struggled to provide GPU servers due to the surging demand. Even major players like Microsoft have become customers of CoreWeave and Lambda Labs, underscoring the significance of these startups in addressing the industry’s pressing needs.
