April 15, 2024

How a struggling chip company benefited from Middle Eastern investors’ AI ambitions

As the United States restricts chip sales to the region over China concerns, California-based Blaize plans to go public through a SPAC backed by Middle Eastern investors.

By David JeansForbes Staff

For more than a decade, a California-based semiconductor company founded by Intel engineers operated in obscurity, developing a chip it hoped could make a dent in Nvidia’s edge computing business. But even after the company, Blaize, raised more than $200 million from venture capital firms such as GGV and tech investor Lane Bess, it needed more capital last year and its existing investors were unwilling to provide more. “They came back to me and said, ‘Can you put up more money to keep us going?’” said Bess, who has invested about $25 million. Forbes. “And it was either that or we basically scored a loss.”

But last summer a third option emerged: a group of Middle Eastern investors with a growing interest in AI. Led by Shahal Khan, who led the 2018 acquisition of Manhattan’s Plaza Hotel, the group was investing billions in artificial intelligence companies with a view to transforming the Gulf states into a preeminent technology hub. Blaize’s chips, which could provide cutting-edge computing power for everything from military drone imaging to autonomous vehicles, would help bolster these ambitions.

Now, Blaize is going public through a SPAC merger with a blank-check company run by Khan, BurTech, at an enterprise value of $894 million, and is expected to bring in $71 million in new capital, he said. the company last month; it expects to list on the NASDAQ in the second quarter of 2024. “The reason we invested in it really was because a lot of my LPs are from the Middle East,” Khan said. Forbes, including the family offices of the royal families of Saudi Arabia, the United Arab Emirates and Qatar. “And they are investing an enormous amount of money in building what they believe is probably one of the major supercomputer centers on the planet.”

Gulf sovereign wealth funds have long been financiers of Silicon Valley startups and AI technologies. But as an American chip company, Blaize’s new ties to the region could present challenges at a time when the US government is tightening export controls on semiconductors to countries such as Saudi Arabia, Qatar and the United Arab Emirates amid concerns that China is using the region to circumvent US restrictions. in obtaining technology.

Other chipmakers, including Nvidia and AMD, have faced government pressure: In August, the tech giants revealed that the United States had restricted exports to undisclosed Middle Eastern nations (a Commerce Department spokesperson denied to Reuters that it had restricted sales). And in November, the White House reportedly expressed concern about China’s ties to the United Arab Emirates’ largest artificial intelligence company, G42, which had major contracts with American companies such as OpenAI. Recently, Bloomberg reported that the Biden Administration forced a venture arm of Saudi Aramco to sell its position in a Sam Altman-backed artificial intelligence startup called RainAI.

Blaize could find himself under similar scrutiny. “The United States government, including people like [the Committee on Foreign Investment in the United States]”They would be interested and look very closely at what they know about this transaction,” said Brian Egan, a Skadden attorney who advises companies on national security and CFIUS issues.

Blaize CEO Dinakar Munagala emphasized that the company would comply with US laws: “As a company, we have all the export control processes in place so that when we sell our chips we make sure we comply with all the rules. “

The Commerce Department did not respond to a request for comment.

Blaize, which is headquartered in El Dorado Hills, California with offices in the United Kingdom and India, has been busy signing deals in the Middle East. In September, the company announced that it had signed a Memorandum of Understanding with Mark AB Capital, a fund controlled by members of the Abu Dhabi royal family. The company said it expected to generate $50 million in annual revenue from the partnership through orders from the Gulf Cooperation Council, which includes the United Arab Emirates and Saudi Arabia, and would train 5,000 UAE nationals in its artificial intelligence software platform. “With this partnership, we are not only harnessing the potential of AI, but we are also paving the way towards an AI-driven nation where progress knows no limits,” Abdullah Mohamed Al Qubaisi, CEO of Mark, said at the time. AB Capital.

“They are investing an enormous amount of money in building what they believe is probably one of the major supercomputer centers on the planet.”

Shahal Khan, founder of BurTech

These deals are being made alongside a number of other AI technology partnerships in the region. In early 2023, California-based artificial intelligence company Cerebras signed a $100 million deal to supply supercomputers to the G42 in the United Arab Emirates, which was followed by a partnership to develop a major large language model in Arabian language. Last month, it was reported that India’s Adani Group formed a joint merger with the United Arab Emirates’ International Holding Co. to “explore artificial intelligence and other technologies.” And in the months before his brief ouster as CEO of Open AI in November, Sam Altman had reportedly been in talks to raise billions from Saudi Arabia and the United Arab Emirates for a semiconductor company to rival Nvidia.

CEO Munagala said Forbes Blaize has clients beyond the Middle East, including the United States, Japan and Germany, but declined to give further details. He added that Blaize’s chips and software are being deployed at an undisclosed airport where they are used to classify countless hours of security footage, and that the company is also targeting defense applications, such as providing computing for video analysis from from drone images; The company said it had bid on at least one U.S. Department of Defense contract, but declined to say more.

Launched in 2011 as ThinCI, the founding team was made up of former Intel semiconductor engineers, led by Munagala, who saw the opportunity to provide computing power for edge applications, such as compute-intensive tasks like video analytics. Strategic investors such as Daimler and Japanese auto parts giant Denso led funding rounds in the company, seeing potential in the company’s claims to run AI models more efficiently on its chips. After launching its first products in 2020, including an “AI studio” that allowed users to create AI applications without code and multiple hardware platforms, the company raised another $70 million from investors including Franklin Templeton, GGV and Singapore’s sovereign wealth fund Temasek.

Now that Blaize has secured a new lifeline, Munagala will embark on a tour to generate buzz ahead of the impending IPO. His first stop this month is Saudi Arabia, where Blaize is currently in talks to form a joint venture to deploy its chips in a new data center outside Riyadh and in drones used for agriculture. (A spokesperson for the contractor, Saudi National Projects Investments, did not respond to a request for comment.) “Dinakar is going to be quite busy this month,” Khan said.

Bess, for his part, is relieved that his investment has found new backers after challenges raising money. “Where the company found its footing,” he said, “is in the progressivism of Middle Eastern governments and royal families having an appetite to invest in their future.”


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