Revolutionizing AI Processing: How Groq Is Leading the Semiconductor Race
Semiconductors have become the lifeblood of the modern digital economy, powering technologies from smartphones to cloud data centers that transform how we live and work. This silicon backbone of the technology industry has grown into a more than $528B global market, supporting behemoths like NVIDIA, Intel, and Samsung while fueling the rise of leading-edge foundries like Taiwan Semiconductor Manufacturing Company (TSMC).
Increasingly, semiconductors are being evaluated not only for performance but also for where they are designed, fabricated, and assembled. Especially within the public sector, eliminating supply chain constraints and adversarial risks has grown increasingly important. This new criterion is giving some suppliers a long-term competitive advantage.
U.S. Government Support for Local Chip Supply
Taiwan has dominated the semiconductor manufacturing industry for decades, accounting for 70% of global market revenue and 92% of the world’s most advanced chip manufacturing capacity. To reduce exposure and reliance on these countries for next-generation chips critical for national security applications, the U.S. passed the 2022 CHIPS Act providing $52B in incentives for semiconductor research and fabrication infrastructure. This was part of an effort to increase domestic chip production from 12% to 20% of the global supply. In addition, in May 2024 the U.S. government implemented a 50% tariff (up from 25%) on semiconductors imported from China.
How the Incumbents Are Reacting
In the wake of this government action, leading chipmakers like Intel, Samsung, TSMC, and GlobalFoundries have announced new domestic U.S. investments and partnerships aligned to these efforts, subsidized by the CHIPS Act. The government awarded Intel $8.5B to fund Arizona, Ohio, New Mexico, and Oregon semiconductor factories. TSMC is building a $12B facility in Arizona ($6.6B funded by the CHIPS Act), and Samsung received $4.6B to expand its presence in Texas.
While these multi-billion dollar “mega fabs” grab headlines, upheaving an existing supply chain is an expensive and time-consuming endeavor that could take years. More immediately meaningful might be activity further upstream from design houses, equipment makers, and materials specialists that provide the critical building blocks for product breakthroughs. Significant innovation is coming from venture-backed semiconductor startups taking on moonshot-style technical challenges and pioneering advances in specialized hardware and software capabilities, making chips faster, cheaper, and more energy efficient.
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How Investors Are Reacting
According to Pitchbook, in 2023 over $20B venture funding went to semiconductor companies, and 2024 is expected to match or exceed this figure. Alumni Ventures is one of the most active investors in this space alongside Intel Capital, Samsung Catalyst, and Khosla Ventures.
Here are a few of the companies we are excited about:
EnchargeAI is leveraging AI to streamline the design and deployment of semiconductor chips. By applying AI to chip design, EnchargeAI aims to accelerate the development process and enhance the efficiency of semiconductor manufacturing. The company is currently raising a $70B Series B to develop an ultra-efficient chip and join the AI chip ‘goldrush.’
Syntiant makes deep learning-driven vision and speech recognition chips tailored to smartphones and laptops running complex neural network models while consuming a fraction of the power required by less advanced alternatives. The company just unveiled its most powerful chip, the third-gen “neural decision” chip, 5x faster than its predecessor.
Frore Systems tackles one of the semiconductor industry’s most persistent challenges: heat. Its innovative air-cooling technology keeps chips at optimal temperatures, improving performance and longevity — a critical consideration as chips become increasingly powerful. We recently participated in their $80M in Series C funding led by Fidelity with participation from strategic investor Qualcomm.
Ayar Labs develops an electronic-photonic chipset designed for applications that require high bandwidth, low latency, and power-efficiency. The company uses silicon-processing techniques and light waves to develop optical-based chipsets to miniaturize the fiber-optic transceivers and process large volumes of data, replacing traditional copper wires.
Groq has designed a language processing unit (LPU), a new type of end-to-end processing unit optimized for computationally intensive applications like AI large language models and inference solutions. Its streamlined system architecture eliminates the complexity and overhead of a traditional GPU, resulting in low latency and nearly instantaneous results. The company is currently raising a Series D, so let’s dive into why we are excited to continue to support their growth.
What This Means for Groq
As seen above, many chips companies are aiming to provide a faster, cheaper, and more energy-efficient chip. Like its competitors, Groq chips are 4x faster than Nvidia GPUs at ⅕ the cost and ⅓ the power consumption. But it has another significant advantage over the larger players: its fully integrated North American supply chain.
Groq has invested heavily in R&D, with a large IP portfolio of 74 patents around power supply and management, processing architecture, data structure, and more. As a result, they are the only provider with an end-to-end solution from silicon to cloud, making their solution extremely difficult to replicate due to the number of proprietary components displayed below.
All Groq systems are designed, fabricated, and assembled in North America, eliminating supply chain constraints and adversarial risks and giving them a long-term competitive advantage, especially within the public sector. Groq recently announced a partnership with CarahSoft, the trusted Government IT Solutions provider, to provide Rapid AI inference capabilities to government agencies and federal systems integrators. Carahsoft will serve as public sector distributor for Groq, making its innovative AI inference solutions available to the Public Sector through Carahsoft’s reseller partners and NASA Solutions for Enterprise-Wide Procurement contracts.
Outside of the public sector, Groq has amassed a strong following with over 260k developers on the platform and contracts with several big tech giants also focused on efficiency, cost, and data security.
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We are seeing strong interest in our Deep Tech Fund. If interested, we recommend securing a spot promptly.
Investors in the fund will own a portfolio of high-tech game-changers and disruptive business models using advanced science and engineering to tackle the toughest and potentially most lucrative tech challenges.
Max Accredited Investor Limit: 249
Looking Forward
Looking forward, the regulatory landscape will continue to drive innovation. In addition to supply chain regulations, environmental regulations are on the rise due to rising climate change concerns. According to the World Wildlife Fund, California’s governor recently said he will sign legislation that would stipulate penalties for large companies that fail to comply with stiff new greenhouse gas emission reporting requirements. The EU’s recently implemented Corporate Sustainability Reporting Directive contemplates fines for companies that fail to disclose the risks and opportunities arising from social and environmental issues.
Groq is also positioned to win in this dimension. The LPU was designed from the ground up to be energy efficient and requires 1/10th of the energy at scale than equivalent GPU systems. The LPU Inference Engine is the leading solution on the market that leverages an efficiently designed hardware and software architecture to satisfy today’s low carbon footprint requirements while still delivering unparalleled compute speed.
Takeaway
The AI chip market — traditionally dominated by NVIDIA, AMD, and Intel — is witnessing a seismic shift with Groq’s emergence. The company’s ability to deliver real-time inference, a crucial component for instant AI results, has set a new benchmark for the industry where low latency and real-time processing are critical.
Going forward, speed will continue to be of utmost importance when selecting a market leader, but this advantage is transitory as companies continue to rapidly improve latency. Regulatory factors will play an increasingly important role in creating longer-lasting advantages as national security and energy emissions become top of mind and legislation is passed placing restrictions on emissions and imports.
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