Cerebras Systems was falling early Friday after recording huge gains on its first day of trading. Investors might want to think twice before backing the chip company at current levels.
Cerebras shares were down 5.6% at $293.78 in early trading. That comes after a 68% gain from its initial public offering price on Thursday, giving it a market value of more than $100 billion on a fully diluted stock basis.
The huge rise comes with investors desperate for exposure to stocks which will benefit from artificial-intelligence spending. Cerebras’ unusually large AI chips excel at running models at speed, while also sidestepping some of the fiddly networking and packaging required for connecting thousands of high-end processors from Nvidia or other chip makers.
However, there are a couple of reasons to be wary of chasing the stock any higher.
The first is to do with Cerebras’ technology. Although innovative, there are reasons that it is a rare approach within the industry. The design of its dinner-plate-sized chips has so far meant they can only run smaller, less complex models, while also presenting challenges around managing defects in manufacturing.
“The system may deliver higher speed for some applications, but it is also less flexible than current deployments of AI compute,” wrote D.A. Davidson analyst Gil Luria in a research note. “This all assumes the systems can be produced at high enough yields to be deployed at scale for highly demanding customers, which we understand has yet to happen.”
Cerebras CEO Andrew Feldman told Barron’s that in the near future his company’s hardware is already privately hosting bigger models and will do so publicly within weeks.
A more obvious issue is the company’s valuation. Cerebras generated $510 million in sales in 2025, meaning it is being valued at a trailing price-to-sales ratio of close to 200 times, on a fully diluted basis. For comparison, Nvidia trades at a trailing price-to-sales ratio of about 27 times.
Of course, investors are banking on Cerebras growing quickly. It had a backlog of $24.6 billion at the end of last year—however, $20 billion of that was a single cloud deal with OpenAI. It expects to recognize about $3.7 billion of the backlog as revenue in 2026 and 2027 combined.
“OpenAI’s deal has simultaneously an exclusivity clause as well as an out for delays. That may indicate Cerebras can’t sell to other frontier labs, while a delay down the line could eliminate or reduce the backlog,” Luria wrote.
Luria argues one way to value Cerebras would be roughly in line with its backlog, at about $25 billion, or roughly $115 a share.
