(Bloomberg) -- AI chip startup Etched raised $120 million to expand manufacturing of its specialized chip that it boasts will rival Nvidia Corp.’s products. 

The round was led by Primary Venture Partners and Positive Sum Ventures, with participation from prominent angel investors, including Peter Thiel, Github Chief Executive Officer Thomas Dohmke and Balaji Srinivasan, former chief technology officer at Coinbase Inc., the company said Tuesday.

Etched is making a big bet that its Sohu AI chip will be a faster and more cost effective way to power transformers, which are a type of large language model that underscores some forms of generative AI, such as OpenAI’s ChatGPT chatbot. The startup is partnering with Taiwan Semiconductor Manufacturing Co.’s Emerging Businesses Group to produce the chip and has recruited people who have worked at firms like Cypress Semiconductor Corp. and Broadcom Inc., Etched said.

The new funding, which brings the startup’s total to about $126 million, will be used for chip production, Etched said. The company declined to share its latest valuation.

Etched is growing at a time when all chipmakers, led by Nvidia, have seen a boom from AI. That is also bringing to light concerns about AI’s immense energy consumption needs. Etched is aiming to provide a more cost effective and energy efficient option that works faster.

AI models are usually trained and run on graphics processing units, or GPUs, like Nvidia’s H100, which can be used with any kind of AI algorithm. Etched’s Sohu runs on one type of AI algorithm, transformers. It’s a risk because Sohu won’t be useful if another type of algorithm replaces transformers.

“We are making the biggest bet in AI,” Etched CEO Gavin Uberti said in an interview. “If transformers go away, so do we. But if we’re right, Etched will be one of the biggest companies of all time.”

The Sohu AI chip supports all the popular transformers from Alphabet Inc.’s Google, Meta Platforms Inc., Microsoft Corp., OpenAI and Anthropic, and can handle tweaks to future models, the company said.

“We are selling to the big transformer models,” Uberti said Tuesday in a Bloomberg TV interview. “We have tens of million dollars of preorders from the customers you’d expect.” Uberti didn’t name specific customers.

Uberti was also awarded a fellowship from Thiel earlier this year.

(Updates with comments from Bloomberg Television interview in the ninth paragraph.)

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