Nvidia partner Lambda Labs seeks $800mn as AI computing demand soars

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Lambda Labs, a cloud computing start-up that rents out servers powered by Nvidia’s artificial intelligence chips, is in talks to raise another $800mn as it looks to capitalise on the bull market around AI and the scarcity of the most advanced graphics processing units.

The proposed deal would vault the company into the ranks of Silicon Valley’s best funded start-ups of recent years, at a time demand is skyrocketing for the computing infrastructure behind the generative AI boom.

The funding would add to the $320mn that the San Jose-based group raised in February at a $1.5bn valuation. Lambda also announced in April that it had secured a $500mn loan using its Nvidia chips as collateral, which it would use to fund the expansion of its cloud services.

Lambda’s rapid sequence of financing highlights the surging demand for Nvidia’s GPUs, which are becoming a sought-after commodity as Big Tech companies and start-ups like OpenAI, Anthropic and Elon Musk’s xAI scrap for so-called “compute” capacity.

Term sheets are expected in mid-July and JPMorgan is helping co-ordinate Lambda’s fundraising, which has not yet specified a revised valuation, according to three people familiar with the process. The capital will be used to purchase more Nvidia GPUs and associated cloud networking software, as well as hire more staff. 

Lambda declined to comment.

Led by co-founder Stephen Balaban, Lambda has been the beneficiary of a close relationship with Nvidia, which has risen to challenge Microsoft and Apple as the most valuable company in the world, managing to reach a $3tn market capitalisation. 

Chief executive Jensen Huang has funnelled its GPUs to the likes of Lambda and its rival CoreWeave as he seeks to diversify Nvidia’s customer base and create new rivals to cloud giants Google, Amazon and Microsoft. Those Big Tech companies are also not only Huang’s clients but competitors developing their own AI-specialised chips.

CoreWeave has meanwhile reached a valuation of $19bn, and last month struck two deals raising $7.5bn in debt and $1.1bn in equity.

It is unclear if Lambda will take on new investors in a new fundraising round. In February, billionaire Thomas Tull’s US Innovative Technology, B Capital, SK Telecom and investment giant T Rowe Price were the major backers of Lambda. 

Lambda raised $44mn in March 2023 with support from Quora founder and OpenAI board member Adam D’Angelo, alongside OpenAI president Greg Brockman and Y Combinator chief executive Garry Tan. 

The California company was originally focused on facial recognition before moving into AI, then again pivoting to cloud computing after realising that its servers were more valuable if rented out to others.