Etched, an AI startup based in San Francisco, announced that it secured$120 million, aiming to create a specialised kind of chip tailored to run a specific type of AI model commonly used by OpenAI's ChatGPT and Google's Gemini.

Unlike Nvidia, which dominates the market for server AI chips with a roughly 80% market share, Etched aims to create a specialized processor optimized for running inference tasks. The produced chip would focus on generating content and responses, which is particularly suited for transformer-based AI models. The company's CEO, Gavin Uberti, sees this as a strategic bet on the longevity of transformer models in the AI landscape.

In Etched's funding round, key investors include former PayPal CEO Peter Thiel and Replit CEO Amjad Masad. The startup has also partnered with Taiwan Semiconductor Manufacturing Co. (TSMC) to fabricate its chips. Uberti highlighted the importance of the funding to cover the costs associated with sending chip designs to TSMC and manufacturing the chips, a process known as 'taping out.'

While Etched did not disclose its current valuation, its$5.4-million seed-funding round in March 2023 valued the company at$34 million. The success of its specialised chip could position Etched as an important player in the AI chip market, provided transformer-based AI models continue to be prevalent in the industry.