British AI processor start-up Fractile is in talks to raise over $200 million in a bid to challenge Nvidia’s dominance in the AI chip market.

The company is in talks with investors including venture capital firm Accel – best known for acquiring a 10 per cent stake in Facebook pre-revenue – to raise new funding at a valuation of $1 billion, the Financial Times reported.

The news follows Fractile’s February announcement of a £100 million investment in its London and Bristol sites over the next three years. The company – already backed by the NATO Innovation Fund – plans to use the investment to create a UK industrial hardware engineering facility in Bristol and expand its team by more than 50 per cent.

Fractile’s chips will use static random access memory (SRAM), and the company claims they can run trained AI models up to 50 times faster and at 10 per cent of the cost of GPU-based AI systems. It intends to begin manufacturing the chips later this year.

European countries are increasingly looking for alternatives to Nvidia-based AI stacks, and investors are taking note: the US chip giant currently trades at a forward earnings multiple of 19.9, lower than both Apple and Microsoft. There is also growing scepticism about using GPUs to run trained models.

Nvidia is not letting these challenges go unanswered. Earlier this month it unveiled a new chip produced in partnership with chip designer Groq, aiming to compete with other SRAM-based offerings.

Despite competition, Nvidia’s GPUs remain a vital part of most AI systems. Mistral, the French AI company that has positioned itself as a provider of sovereign AI for the European market, announced yesterday that it would use Nvidia products for its $830 million expansion on the continent.

---