Why Cerebras Systems Stock Jumped on Tuesday

Cerebras Systems (NASDAQ:CBRS) charged sharply higher on Tuesday, climbing as much as 11.2%. By the time the market closed, the stock was still up 10.1%.

The catalyst that sent the artificial intelligence (AI) chipmaker higher was a collaboration with a titan in the tech industry.

Image source: The Motley Fool.

Head in the clouds

In a press release that dropped on Tuesday, Cerebras announced plans to make its "fast inference" available to Oracle (NYSE:ORCL) Cloud Infrastructure (OCI) customers, including "AI labs, enterprises, and developers building interactive, intelligent applications."

Cerebras went on to tout the benefits of its Wafer-Scale Engine (WSE) -- a massive semiconductor 58 times larger than Nvidia's Blackwell B200 AI chip. The WSE combines 900,000 compute cores and boasts "19 times more transistors, 250 times more on-chip memory, and 2,625 times more memory bandwidth" than the B200, according to a regulatory filing.

The issue that plagues current AI processing is latency, or the delays that naturally occur when data travels across chips or networks. Cerebras says that integrating compute and memory on a single wafer-scale processor reduces data movement, thereby reducing latency and speeding inference -- or the processes AI systems execute once training has been completed.

AI agents, which are trained to complete complex, multi-step processes without additional human intervention, are gaining in popularity. Each step in the process increases latency, which can slow agentic workflows as the complexity and number of steps increase.

Access to Cerebras WSE is already available on Amazon Web Services (AWS) and Microsoft's Azure. Adding Oracle to the mix is an important validation for Cerebras' technology. Beyond that, it gives the chipmaker access to Oracle's existing base of enterprise customers, increasing its growth potential.

In the second quarter, Cerebras said its fast inference cloud business nearly quadrupled, with cloud revenue surging 287% year over year to a record $128 million, while core total revenue jumped 103% to $210 million. Additionally, the company is spending heavily to expand its data center capacity, so its losses continue to mount.

To be clear, Cerebras is a risky proposition as the technology is still finding its customer base. Moreover, it competes directly with Nvidia, widely regarded as the leading AI chipmaker, so Cerebras is working hard to carve out a niche in a highly competitive landscape. And at 39 times sales, there's a lot of growth baked into its valuation.

Let the buyer beware.

Danny Vena, CPA has positions in Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Amazon, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.