Key facts
- Cerebras shares rose 5.5% in premarket trading following bullish analyst coverage.
- Nine brokerages, including IPO bookrunners, initiated coverage with positive ratings.
- Morgan Stanley rated Cerebras 'overweight,' citing a unique investment opportunity against Nvidia.
- Citigroup set a 12-month price target of $340 for Cerebras shares.
- Cerebras counts Amazon.com and OpenAI as customers and is backed by SoftBank.
- The company's shares have lost approximately 36% since its IPO debut, despite an initial 70% gain on the first day.
Cerebras shares climbed on Monday as multiple Wall Street firms initiated coverage with bullish calls, backing the chip designer's unconventional AI strategy more than three weeks after its debut. The company's shares rose 5.5% in premarket trading, with at least nine brokerages, including IPO bookrunners Morgan Stanley, Citigroup, Barclays, and UBS, initiating coverage.
California-based Cerebras designs wafer-scale engine chips, roughly the size of a dinner plate, to accelerate processing and challenge traditional GPU-based systems like those from Nvidia that rely on clusters of interconnected chips. Morgan Stanley analysts, led by Joseph Moore, rated the stock 'overweight,' stating, 'This is a unique chance to invest in an AI processor company with a first-mover advantage against Nvidia, and offers substantial upside as the category evolves.'
Citigroup expects Cerebras' shares to reach $340 in the next 12 months. IPO underwriters are permitted to publish research on a stock 25 days after its listing. Cerebras counts Amazon.com and OpenAI as customers and is also backed by the ChatGPT maker and Japanese investment giant SoftBank. SoftBank reportedly sought to take the chip designer private before its debut.
Cerebras debuted on the Nasdaq more than three weeks ago, closing about 70% above its initial public offering price of $185. However, its shares have since lost approximately 36% as of the last close, amid concerns that the global tech rally had extended too far and as investors priced in hawkish Federal Reserve monetary policy for the remainder of the year, influenced by the Middle East conflict. The Philadelphia SE Semiconductor Index has risen 60% this quarter, on track for its largest quarterly gain since January 2000.
Wall Street's major indexes rose on Monday, with chipmakers bouncing back from a sharp selloff last week. The S&P 500 technology index gained 2.5%, while the Philadelphia SE Semiconductor index advanced 6.7%. Intel shares jumped 12.3% after a report that Alphabet's Google had placed a significant order for its tensor processing units. Concerns about tighter monetary policy and Broadcom's recent results had previously impacted the sector. The Dow Jones Industrial Average rose 0.35%, the S&P 500 gained 1.05%, and the Nasdaq Composite advanced 1.76%. Stronger-than-expected jobs data for May had contributed to a previous market rout, increasing expectations of interest rate hikes. Investors are awaiting Wednesday's consumer prices report for May.