Cerebras's stock looks like a risky bet on AI hype

By Philip van Doorn and Britney Nguyen

The chip company's shares trade at a very expensive sales multiple on a trailing basis

Cerebras Systems' initial public offering Thursday was a tremendous success, with shares shooting well over $300 after the stock was initially priced at $185.

Cerebras Systems' successful initial public offering this week shows that investors are hungry for ways to play the boom in artificial-intelligence chips - but shares are now extremely pricey.

Just how much? The stock (CBRS) trades at a steep 131.3 times its 2025 revenue of $510 million, based on Thursday's closing market capitalization of $67 billion. Cerebras shares were down 3.9% on Friday afternoon.

To put that number in perspective, the S&P 500 SPX trades at a trailing price-to-sales ratio of 3.6, while its information-technology sector XX:SP500.45 trades at 10.8 times trailing sales, according to FactSet. Cerebras shares also trade far more expensively than the S&P 500's semiconductors and semiconductor-equipment industry group XX:SP500.4530, which has a trailing price-to-sales ratio of 19.3, according to FactSet.

The main risk for retail investors at this point is that "very high expectations" for Cerebras are already being priced into the stock, given where it is trading relative to its revenue, Greg Martin, managing director at Rainmaker Securities, told MarketWatch in emailed comments.

Cerebras shares closed 68% above their IPO price on Thursday, reflecting enthusiasm in the market "for a new type of semi company with an impressive product," D.A. Davidson managing director Gil Luria told MarketWatch.

See more: Cerebras's stock pulls back after a blowout opening day

Investors' willingness to pay a hefty multiple to own Cerebras shares "indicates that non-Nvidia AI silicon can now clear public markets at aggressive valuations, and that the broader AI investment cycle is still viewed as early, with substantial room for multiple hardware providers," said Ye Cai, an associate professor of finance at Santa Clara University's Leavey School of Business, prior to the start of trading.

But the high multiple Cerebras is currently trading at will rely on the company's success with its products going forward. The current valuation "makes an investment in Cerebras risky, as it is in very early stages of commercializing its product and it is unclear how much of the market they can capture," Luria said.

Furthermore, the company has a partnership with OpenAI, but the ChatGPT creator "can choose to walk away from their obligations" if Cerebras fails to deliver on the 750 megawatts of computing it plans to provide, Luria added.

More positively, Cerebras reported a 39% gross margin in 2025.

The company will have to show investors that demand will lead to "durable revenue growth, margin expansion and a business model that public investors can support over time," said Jennifer Pruitt, a portfolio manager at the Private Shares Fund. Cerebras makes up 1.91% of the fund's holdings.

With an attractive gross margin but a very high trailing price-to-sales figure, how might Cerebras compare with other large semiconductor manufacturers? For context, here's how the largest 10 companies in the iShares Semiconductor ETF SOXX stack up on the basis of price to 2025 sales:

   Company                                Market cap ($bil)  Trailing price/ sales 
   Nvidia                                            $5,710                   21.3 
   Broadcom                                          $2,082                   23.6 
   Taiwan Semiconductor Manufacturing                $1,863                   16.3 
   Micron Technology                                   $875                    8.1 
   Advanced Micro Devices                              $733                    8.9 
   ASML Holding                                        $606                   12.9 
   Intel                                               $583                    3.8 
   Lam Research                                        $374                   12.3 
   Applied Materials                                   $350                   11.5 
   Texas Instruments                                   $280                    9.6 
                                                            Sources: LSEG, FactSet 

Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page

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-Philip van Doorn -Britney Nguyen

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05-15-26 1321ET