Cerebras Soared 68% in Its First Day of Trading. After This Explosive IPO, Is It Too Late to Buy the Stock? | The Motley Fool

Artificial intelligence (AI) stocks have driven the S&P 500 during this three-year-plus bull market as investors rushed to get in on a game-changing story. This technology, with its potential to reshape the way businesses operate, could supercharge the revenue growth of its developers and users.

Companies such as chip designers and cloud service providers -- from Nvidia to Amazon -- have been among the first to benefit as they power this technology revolution. Chips are fueling key AI tasks, while cloud players offer customers access to these and other tools for AI workloads.

Many of these players -- technology giants that have been publicly traded for decades -- have seen their share prices climb in the double, triple, and even quadruple digits in recent years. But today, there's a new kid on the block, and this company is showing its revenue and stock performance strengths.

I'm talking about Cerebras Systems (CBRS 10.08%). The AI chip designer, in its first day of trading, soared 68% to a market value of almost $67 billion. Cerebras' IPO priced at $185, opened at $350 on May 14, then went on to close at about $311. Cerebras raised more than $5.5 billion for the biggest IPO this year. Now the question is, after this explosive launch, is it too late to buy Cerebras stock? Let's find out.

Before answering the question, let's zoom in on Cerebras' technology and business performance so far. Like Nvidia and chip giant Advanced Micro Devices, Cerebras is powering the most essential of AI tasks, from the training of models to inference -- or the process of thinking through problems and generating answers. But here's how Cerebras stands out: The company offers a chip that's much larger than those of rivals, and it says that this chip size is what allows it to offer incredible speed.

Cerebras' wafer-scale engine (WSE) is 58 times bigger than Nvidia's B200 chip. And the company says the WSE offers more than 2,600 times the memory bandwidth of two Nvidia chips working together. Customers can access Cerebras technology in several ways: They may order hardware to deploy in their own facilities, access Cerebras chips through the Cerebras Cloud, or turn to other cloud providers, such as Amazon Web Services (AWS).

So far, this offering is driving financial results. The company's revenue jumped more than tenfold in just three years, from about $24 million in 2022 to more than $290 million in 2024. And last year, revenue surged 76% to $510 million. However, Cerebras is still working toward profitability on an operational basis -- the company's loss from operations totaled about $145 million last year.

Of course, it's important to note that Cerebras may be in the early days of its growth story, and AI growth, too, has much farther to go as the technology is actually applied to real-world problems on a regular basis. So Cerebras might generate significant profit down the road if the momentum continues.

Now, let's consider whether this rising AI star is a buy today -- or if it's too late to scoop up the stock after its explosive IPO. Cerebras clearly offers compelling technology that customers like, as we can see through the revenue growth numbers over the past few years. Another positive sign: Partnerships with existing customers are expanding. Cerebras says its top 10 customers increased their spending by 80% over the first 12 months of their first purchase.

And with today's high demand for chips -- as noted by major AI players in the recent batch of earnings reports -- there's reason to be optimistic about the long-term revenue picture.

That said, history shows us that IPO stocks may roar higher right out of the gate, but in many cases, they've offered investors buying opportunities weeks or months later. Considering this, as a long-term investor, you may have plenty of time to get in on Cerebras at a better entry point, on the dip. All of this means it's not too late to buy Cerebras stock -- instead, it may be a bit too early.