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Investors in UK chip innovator Graphcore, which has offices in Cambridge as well as local funders, are confident of effecting an imminent cash resuscitation.

Amadeus Capital Partners in Cambridge is among the VC backers of the Bristol-headquartered business which has just posted losses of $204.6 million for the year to December 31 – up from $184.5m year-on-year.

Respected tech media have reported that Graphcore needs to raise substantial new funds within months “to offset mounting losses incurred over the prior financial year and remain a going concern.”

Ironically, the UK government – which has been blowing the trumpet for a new Silicon Valley in the UK – has contributed to Graphcore’s problems. CEO Nigel Toon reportedly asked PM Rishi Sunak to look at the company’s technology and include it in the exascale computer project – ironically launched in Bristol. Its claims, as an AI thought leader, fell on stony ground.

Exascale UK and Europe project contributors are closely monitoring the situation at Graphcore and sources close to one of the key funders told Business Weekly a major cash raise is already in the pipeline.

One thing is certain. If Graphcore failed to raise new money and suffered the worst consequence, there would be an almighty scramble for its engineers in a Cambridge and UK war for top talent.

The company has already been forced to shut operations in Norway, Japan, and South Korea and scale back operations elsewhere; headcount has also tumbled 21 per cent year-on-year to under 500 – 494 to be precise.

Graphcore had been trumpeted as the UK’s answer to US giant NVIDIA which had a $40bn bid for Cambridge superchip architect Arm smothered by global competition authorities last year.

Arm has since completed a fabulous, multibillion dollar IPO on Wall Street and is recruiting big for a new Bristol office on Graphcore’s doorstep as well as expanding its high-end Cambridge teams.

Business Weekly understands that many international VC firms have fought shy of backing Graphcore because NVIDIA is such a far-reaching and powerful player in the sector.

Ironically, NVIDIA sources told Business Weekly two years ago that the company would inject $100bn into the Cambridge and UK economies following a takeover of Arm.

In another irony, Arm founder Dr Hermann Hauser – also co-founder of Amadeus Capital Partners – is now an influential voice in the fundraising efforts on Graphcore’s behalf.

• Graphcore’s Cambridge offices are at Kett House in Station Road.

Whole porrtfoilo seems oto be wwell chosen and growing as tehy stated in sales -the main indicator of progression to profitable maturity.

After massive write down of graphcore to 37m on our books in year end 2023 (from 113m year end 2022) there is not much left to go and quite a big upside potential for Graphcore. Worst case it is worth zero (intellectual property sold just to cover staff liabilities) but several credible scenarios where it is worth much more than 37m for us.

Even moderate commercial success in the new chip they are developing for release in 2024 will result in a valuation (tested by fundraising or share b to b sales) 10x current. Better than moderate success and it could be 100x. That is a lot of upside against a 37m risk for us.

Graphcore in real competition in AI sector with NVIDIA. I note AMD will try to do an AI chip as with others. 80% global market share by NVIDA not sustainable. US export restrictions and internal anti trust legislation will create openings for others. There is a deal to be stuck with China Graphcore can do that NVIDA can’t. Don’t count Graphcore down and out just yet.

Https://sifted.eu/articles/graphcore-finances

Last chance saloon. If new 2024 release chip does not make it then it’s over. If it does 10x valuation quickly. Inference computing seems to be graphcore’s sweet spot not raw number crunching. Too much focus on hardware and too much in house software. A bit like IBM in the 70’s when their minor contractor Microsoft MS Dot displaced IBM as the global giant.

Anyhow unless a juicy funding offer emerges in the next week Graphcore will not be helping our NAV/share. maybe by year end results. No doubt GROW helping look for interim funding for Graphcore so can be a helpful announcement at any point.

Biggest is a 1987 style sudden corection with FTSE down 20% and ourselves more.

https://www.telegraph.co.uk/business/2023/10/08/britain-heading-another-black-monday-stock-market-crash/

I had thought any volatility to the downside for us would decrease as we approach zero as economic theory predicts but that is not happening. We seem just as volatile at this low base level as we did when we were much higher relative to NAV/share.

Anyhow money to be made for the brave right now and a lot of it but not risk free. Poor time to be leveraged but I am where I am. With remortgage much of that will be to make my spread position crash proof and only adding more shares once that has been achieved. I’ve pencilled in 1.0 as the lowest we could possibly temporarily go under the worst crash scenario. Wish me luck

Could be worth an order of magnitude less or more than what we have it on our books for. We will only know when they have a completed funding round or a buy in.

Graphcore has intellectual property worth a lot but is struggling to commercialize it. Through my friends tech start up been there, done that , got the T shirt. Can turn on a dime though.

I love our grow portfolio AI exposure. Frustrating Graphcore has not flown but it wil find a way in such a large growing market with a product that is in some ways ahead of it’s time and, thus, mostly in universities.

I am a hybrid investor. IN my ISA most shares of GROW will be held for 10 years or so. IN my spread bet a 2 year horizon for most.

I deeply regret not selling more in my spread bet when they were over 11 quid but we are where we are. I expect they will be back there within 2 years and thus a 4 year scary value pause.

I’m an economist so lost decades are supposedly my area rather than short term market movements (which are difficult to time in any case).

Are we heading for a lost decade for value generated by tech start ups? No, no absolutely no. AI and tech by it’s nature is hard to predict and thus lots of space for new firms to find niches rather than old monopoly firms to crush the competition.

GROW by a having a dynamic balanced well chosen portfolio fed by seed funds across the EU/UK is in the best position to exploit the sector. Certainly from here we will have outsized returns for 10 years.

Are we looking at a lost decade for the FTSE 100 and DOW Jones Industrial Average? Maybe.

Deglobalization and higher interest rates than the last decade may weigh on them and produce flat returns. The de-coupling of China is a big downside and along with that a damaging division into trading blocks , not as rigid as SOVIET times but even more damaging as we are starting from a high base. P/E ratios in USA still higher than long term averages. Lots of room for SP stagnation.

Just as Brexateers in UK starting to admit Brexit causes GDP damage due to trade uncoupling the neocons in USA asking to uncouple form CHIna will find it has an economic cost in lost GDP. All driven by emotion not economics And that is all without war -in spite of the drums beating on that.

Thanks for posting. I do read you_hav as it is constantly pessimistic (I think overly so) good to have a look at that scenario. I fear from these levels a major sudden market correction could see a sudden 30% dip even from 2.10. In any case I need to set some sort of low possible on an assumed 2% risk to determine the allowable leverage on my spread bet. For me that is 1.40. Looking like a more solid assumption as we recover somewhat form historic low of 1.99 on open.

Sang I expect our October update will not show further losses and will start the reporting of gains. Will start modestly but accelerate over the next 2 half’s. Market fear of an unlimited series of losses is behind us trading so far below NAV/share and broker guidance but fear well overstated. Still if one looks at it in a shallow way 2 half's with losses may well be followed by several more given the market is jittery. Looking at is comprehensively means looking at the portfolio one by one and making a judgment if they are over valued, about right or conservative. For my money conservative so 4x 5x upside on offer if one can wait just 2 years.

I’ve not run any statistical analysis but it seems for the moment we move predominanlty in reverse to us 30 year bond rates. Up they go to long term highs and down we go. We don’t seem to be moving up or down on UK or Eu inflation or interest rate expectations -which are moderating. We are not moving with the tech sector which has substantially recovered from lows.

It may well b the linkage is logical and not random. The money that goes into our unlisted sector can and will pivot to 30 year bonds if they are high enough. Once there they can hold or pivot out if interest rates and inflation come down. EH Bonds wil be worth much more than they paid if long term interest rate expectations come down. Yes while there they give up some great value in our sector but they can make a risk free bomb.

WHy 30 year bonds? Because those will have the most dramatic uplift if interest rate expectation come down. THe uplift big enough to ignore the great buy in prices for Draper on offer at the moment.

Will all reverse itself quite quickly on a turn in interest rate expectations. Fed, BOE and eCb all still talking tough. they have to talk tough until inflation drops a bit more. Talk is cheap though. They all badly want to drop interest rates for fiscal reasons as well a systemic risk. Not to mention the staggering cost of QT.

SO for my money I think the pivot back will be earlier than the market anticipates. I also think this SP dip overdone even in this circumstance and other money will find a way in and give us some partial recovery in the near term. 2.08 is just silly.

Scarry roller coaster for sure. Wish I had a crystal ball and had sold 100% at our peak and was rebuying now. Sadly no. I did a bit of that but topped up on the way down much too quickly.

New 9 year low established. Most tech (including our own Trustpilot and UI path well off (70%) lows but not us.

We seem to be down in sync with us 30 year bond rates

UI Path a more nuanced history. last round fundraising feb 2021 (pre bubble) gave it a company valuation of 35bn. Also gave UI path a 100m value in our portfolio march 31 2021 (pe bubble). However we disposed of 49.8m by next results leaving a 50m on our books so our valuation of UI path was not marked up during the bubble at all. Conservative.

Today UI Path has a value of 10bn and is well off it’s 52 week low of 10.4 and is trading at 17.2. Trust Pilot also well off 52 week lows (62) vs 105 today. Given we recycled money upstream -where valuations never were in a bubble- we should also be well off 52 week lows.

Looking forward to remortgage. Hope these SP prices hold long enough for me to top up. Fear our half yearly preliminary results will boost SP maybe suddenly -although never has in past.

We will go up. Impossible to say when or what pattern. Probably swift when it starts. THe 2 year drift down at some point soon will be a 2 year climb back up. I suspect back to 11.82 within 2 years and then beyond. There has been no dilution since we had 11.82 and the underlying portfolio will be 4 years more mature pus all the reinvestment upstream we did on 2021 and 2022 profits.

10 years is a good life cycle on average of a start up with seed to later round or IPO exit. Some take longer but some faster.

4 years of steady sales and product development growth is 40% of the life cycle. Portfolio has almost no firms in obvious trouble. All growing sales at a great clip.

Https://pitchbook.com/news/articles/VC-performance-IRR-down-double-digits

Thought machine our largest holding by value, over 109m. It was one of the few with a NAV increase on our finals. Could easily confirm a price discovery well above what we have on our books for. Late round IPO does not matter. Even talk of an IPO nice to hear.

When will this end?

I’m excepting reassuring data on NAV calculations mid October on half yearly update. SO maybe then.

Correction: BOE Brave to be doing QT right now.

7% is not only the spot rate from 1971 is is the average rates over the last 52 year period. . SO 5.5% no big deal.

For my money I think this is a spike that will not last and this has massive effects on what asset class will perform best over the next 20 years. I think we have a “ Japanization” of the UK economy and that means quite low interest rates and sluggish growth. Enormous forces are there to keep interest rates at 2 or 3% not the lest government debt servicing costs. They will bring them down to that range at the first opportunity. Even QE will be used now regularly every recession we get. BOE brave to be doing QE right now but not sustainable . Just for show that they can and will do that. Will never QT away all the QE. Just too much money involved.

I suspect incoming Labour government can cut an anti inflationary deal with BOE to put QE that we have outstanding and any new QE into long term infrastructure and endowment s of Universities and the like. Even endowing pension pots. Endowment is anti inflationary (as opposed to current spending) and thus financially stabilizing. Sunak team just firefighting now until the election and not expecting any new thinking from them.

QE and ultra low interest rates over a long period of time was a game changer. Nobody knew it could be done without Weimar republic massive inflation resulting. Now they know they can do it -too tempting a tool to leave in the shed.

We have never been lower in our history as a publicly traded trust.

OUr first results (half yearly 2016) stated a NAV/share of 3.52. We are now 7.80/share with discounts applied to reflect current market conditions rather than wholly rely on last round valuations. For me conservative enough,

Portfolio vastly stronger than in 2016. No core company about to go under and yet some churn is quite normal in the sector. Well chosen core portfolio and some great seed companies coming up the pipe.

The SP overcompensates for uncertainty regarding interest rates that are high but hardly catastrophic historically. About 1 or 2% above recent long term norms. Average rates over a longer period of time, say between 1971 and 2023, were 7.11 (higher than today). The peak was 17% in November 1979 and yes 17% rates would drain most long term investments of movable capital but only for a short while. Private equity markets did not collapse in 1979 as you would expected given the noise today over 5.5% interest rates.

What we have today different from 1979 is retail investors able to go in and out of private tech equity markets. While this has created liquidity it has added much volatility. Volatility is a 2 edged sword. Go down quickly and irrationally far but can recover fast as well.

For my money I am holding on and hoping for fresh money to top up at this SP.

Thanks for sharing. Sadly I am 100% into GROW and since we are at our 9 year low I can’t possibly be neutral. My average buy in price is circa 580. Ouch.

I’ll diversify a bit when we hit 11.82 again -whenever that is. Still confident these will rocket just can ‘t know when. US budget fights a dark cloud for October so maybe November on our half yearly results. Oil at 90 weighing on shares a bit due to impact on inflation. .