r/valueinvesting
My thoughts on CBRS
Cerebras (CBRS) has huge upside capturing 1% of the $500B AI chip market, backed by strong leadership and its competitive WSE architecture.
- Strong leadership and a truly competitive Wafer-Scale Engine (WSE) architecture developed over 10 years.
- Massive $500B TAM implies huge upside even with a conservative 1% market share capture from incumbents.
- Attractive ~11x EV/Sales valuation represents a discount to incumbents like NVDA and AMD.
The investment case for Cerebras (CBRS) fundamentally rests on two core questions. First, is Andrew Feldman the right leader with the team to deliver and execute on the plan? Second, how much market share can he realistically take from the incumbents and hyperscaler alternatives, specifically folks like NVIDIA, AMD, AWS Trainium, and Google TPU?
The response to that first question is an easy sell. Andrew is exactly the sort of CEO who has the grit to pull complex technical pieces together and drive hard results. Cerebras has traveled a long development road for over 10 years, and their Wafer-Scale Engine (WSE) could well be one of the few true architectural competitors capable of standing up to the legacy players.
For the second question, even if we stay highly conservative and model just a 1% market share capture, the absolute upside is massive. Look at the macro backdrop: NVIDIA just reported a staggering $75 billion in data center revenue alone, which is up 21% quarter-over-quarter and 92% year-over-year. If you take their trailing twelve months (TTM) revenue of $230 billion and apply a 74% growth rate, NVIDIA's next twelve months (NTM) revenue reaches $401 billion. Assuming NVIDIA commands roughly an 80% market share of the broader space, that implies a total NTM market size of approximately $500 billion, a runway that can grow even further into 2027 and 2028.
Assuming Cerebras is able to capture just 1% of that $500 billion market, it yields an implied revenue base of $5 billion. Applying a \~11x Sales-to-Enterprise Value multiple on that revenue—which represents a discount compared to NVIDIA's implied valuation of a $5.5 trillion EV/market cap on its forecast data center revenue, and sits below current sell-side estimates of 14x for NVIDIA and 10x to 15x for AMD and Intel—the implied Enterprise Value for Cerebras comes out to $55 billion. Depending on the exact boundaries of your implied market sizing (ranging from $445 billion to $500 billion), the specific market sizing timeframe, and ultimate market share expectations, the implied share price stretches across a wide range from $200 to more than $600+.
That 10-year road for Cerebras is a brutal cash burn, especially when Lisa Su just said AMD expects like 35% annual CPU growth for the next five years, which is insane, https://wiseek.ai/ticker/amd/news/amd-ceo-projects-35-annual-cpu-market-growth-for-5-years-clarifies-china-strategy-df8307da63b123f491cfe1b82c8677faaa505834ae937b1bf0cee90593371278/
Yeah? Who's going to build that 35% growth and where is Lisa going to get the memory? NVDA has stagnated at 190 to 200 and that's where it will stay for a while simply because there isn't capacity to build all these gpus they've imagined selling. That's where CBRS steps in and takes their market share because they don't compete for a constrained build capacity.
Just 1% of my imagination is a lot of money too!
Cerebras is not worth buying until their lockout period ends this fall at the very least
follow flair rules or garbage.
oh, nvm, AI companies are garbage anyhow
TLDR; my thoughts as a Cerebras bag holder: it will go up (please help me unload my bags) because AI.
well reasoned answer, sir
This whole analysis reads exactly like a sell-side pitch pumped full of hopium. The "if they just capture 1% of a $500B market" argument is literally the oldest trap in tech investing. Enterprise compute doesn't scale linearly like that. You don't just magically grab 1% of the broader market; you either land massive whales or you get completely starved out by Nvidia's entrenched CUDA ecosystem. Projecting a sudden leap to $5 billion in revenue is wild when their actual full-year 2026 guidance is sitting around $855 to $865 million.
Then there's the valuation math. You can't slap an 11x revenue multiple on Cerebras and call it a "discount" to Nvidia just because the number is lower. Nvidia is printing money with ~75% gross margins. Meanwhile, Cerebras just guided for 36-38% gross margins and deeply negative operating margins because they're having to rent expensive third-party data center capacity just to fulfill their own cloud contracts. Wall Street does not hand out premium, software-like multiples to hardware companies that are actively burning cash to scale.
Ultimately, the real bottleneck isn't even customer demand, it's physics and real estate. Feldman literally admitted on their Q1 earnings call that their main constraint right now is data centers. You can have all the massive, multi-billion dollar OpenAI contracts in the world, but if you can't secure the power, specialized cooling, and physical space to actually plug these giant wafer-sized chips into, your revenue recognition just stalls out. Trying to justify a $600+ price target based on theoretical top-down TAM math while ignoring the brutal logistics of building out AI infrastructure is quite optimistic.
Projecting a sudden leap to $5 billion in revenue is wild when their actual full-year 2026 guidance
If anything is to be learned from the last 12 months, I think it is we have to careful with making those judgements too quickly. And I don't think he said it would reach that revenue by the end of this year and they are growing three digits YoY.
With that being said, it not a stock I'm jump into at the moment. Maybe if gets down to 100-120 USD, if would be a good risk/reward. The bull case is that the end of silicon road nearing, we can't make them much smaller. So a chip that takes up the whole wafer could be interesting as a way to boost compute.
Agree, still extremely high without a long enough view into execution. With that said between the AWS & OpenAI deals I believe they were projecting a jump to over $3B in 2027. We’ll see what happens, but interesting company to throw on the watch list.
Yeah, it's definitely not a company you should rule out, it will be a watchlist stock for me for now.
Posts with the "Detailed Investment Analysis" flair MUST have the following things:
- A description of the company
- An assessment of the Moat (What is intrinsic to the company that protects against competition)
- An analysis of the potential risks (Things that could go wrong: execution, regulation, disruption etc)
- An estimation of intrinsic value (Ideally via a DCF but at least an estimation of future cash flows)
- Other relevant information (Management and their incentives, industry cycles, debt etc)
I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/ValueInvesting) if you have any questions or concerns.