Key Points
- Cerebras Systems has fallen more than 30% from its IPO-day high, but the stock still looks expensive despite expectations for strong sales growth over the next year.
- Even after signing $20 billion in contracts with OpenAI, Cerebras faces significant customer concentration risk that investors should watch closely.
- While price-to-sales multiples do not make the stock look objectively cheap, strong revenue growth in coming quarters could still help push shares higher.
Cerebras Systems (CBRS) has fallen by more than 30% since it topped out at $386.24 on May 14, the day of its initial public offering (“IPO”). Some investors might see an opportunity to buy with Cerebras’ stock tumbling, thinking it’s bound to move higher. Yet, despite the drop, Cerebras remains tremendously pricey, even as its revenues are poised to soar higher this year and next.
Cerebras has been the hottest IPO in what’s expected to be one of the biggest years for IPOs in some time. The maker of semiconductors for artificial intelligence (“AI”) data centers has generated significant interest, as many investors hope Cerebras can achieve some of the wide margins enjoyed by market leader Nvidia (NVDA), which widened its margins further in the latest quarter.
Despite the strong reception, Cerebras has had a rough go during its first few weeks. Underwriters initially projected the stock would price in a range of $115 to $125 per share, and then estimates rose to $125 to $135 in the days before the IPO. The range officially rose to $150 to $160 a couple of days ahead of the offering, before dealmakers ultimately priced the stock at $185 for buyers.
When the stock finally went public, it opened at $350 per share before soaring to more than $386 on its first day. That’s been the high-water mark so far, meaning that many investors are already underwater on their investments just two weeks after the IPO.
But the investment case for Cerebras remains the same as when the stock debuted, although it is now substantially cheaper. Cerebras makes wafer-scale chips, about the size of a dish, that can process AI inference workloads much faster than Nvidia’s graphics processing units, according to the company. Inference is the AI process that produces outputs or answers for users after it has been trained on a dataset.
Inference is increasingly used across AI workloads, so more efficient solutions in this area could create a significant competitive advantage. Plus, Cerebras says its chips are more cost-effective when you factor in hardware and operating costs.
Cerebras seems to have a lot going for it and is trading for much less than before. Is it a good buy right now? Here’s a look at what the company’s fundamentals and risk profile suggest.
Cerebras’ Customer Concentration Is a Key Risk to Watch
One of the key risks at Cerebras is its extreme customer concentration. While a recent new business deal with OpenAI expanded its revenue base, it hasn’t significantly reduced this risk.
Cerebras’ customer roster has been very narrow for its few years of existence, although some of this concentration has been due to its low sales. Often by necessity, a company’s first few big clients account for the largest share of its sales, but as the business grows, the risk tends to resolve itself.
In the first half of 2024, the Emirates-based company G42 comprised 87% of Cerebras’ sales. The company made progress in 2025 by signing another larger client. G42’s share of sales fell to 24% in 2025, while Mohamed bin Zayed University of Artificial Intelligence accounted for 62%.
It’s important to remember, however, that Cerebras only had $70 million in sales during the second quarter of 2024. For the full year, it reported sales of $510 million, an average of $127.5 million per quarter. The company is starting from a low base and growing its absolute sales volume briskly.
The expanding client roster is welcome news, even if it remains too concentrated. An estimated $10 billion deal with OpenAI doesn’t actually do much to resolve this issue in the near term. The two firms inked the deal in January for Cerebras to provide 750 megawatts of computing power through 2028, in what they called “the largest high-speed AI inference deployment in the world.”
Then they supersized the deal in April, agreeing to a further $10 billion in spending from OpenAI, according to The Information. This deal likely catapults OpenAI to become Cerebras’ largest customer by a long way, meaning that it likely still has just two or three clients accounting for the vast majority of sales. Still, landing OpenAI is a significant vote of confidence for its technology.
Cerebras continues to look to expand its client base. It offers remote computing services to other major companies, including IBM (IBM), Mistral AI, and Meta Platforms (META). In March, it inked a deal with Amazon (AMZN) that will see its solutions offered on Amazon’s cloud services.
Further significant deals would be welcome news to Cerebras investors. Its high valuation relies on the company continuing to grow sales at a lightning pace, but investors should not overlook the importance of reducing risk by completing more deals to build up a wider roster of customers.
Cerebras Stock Looks Expensive. Is it a Good Buy Right Now?
As a company, Cerebras could have immense success if it begins to eat into Nvidia’s business as the AI market shifts from training to inference. But the big question for investors is: What are you paying for this business and its prospects? No business is a buy at any price, while even a bad business can be a buy at the right price.
The company’s market capitalization was around $57.5 billion during morning trading on May 28. That’s expensive for a business that’s not turning an operating profit. While Cerebras technically generated earnings of $238 million in 2025, it was due to a GAAP accounting quirk, not operations.
Instead, turn to operating earnings for a clearer picture of what’s going on. The company moved from an operating loss of $101 million in 2024 to an even larger loss of $146 million in 2025.
Since the company is unprofitable, let’s look at it on a price-to-sales basis. This metric is often typical of newer companies that need to invest in growth and may therefore burn a lot of cash early on.
A look at the company’s 2025 sales of $510 million puts the price-to-sales ratio at a blistering 113 times. But investors should be looking ahead at forward sales, given the rapid growth here.
The prospectus offers some insight into how fast the company may grow sales over the coming two years. Cerebras reported a sales backlog of $24.6 billion at year-end 2025, and executives estimate that it will report 15% of this total amount as actual revenue in 2026 and 2027.
Let’s average the expected sales in the two years, assuming no other incremental growth, to come up with an estimate. The annualized revenue would be almost $1.85 billion, up more than 3 times from the 2025 level. With its recent market cap, price-to-sales is about 31 times.
Because of how the math works, the sales estimates likely overestimate this year’s revenue but underestimate next year’s. Consequently, the 2026 price-to-sales ratio would actually be higher, while the 2027 estimate would be lower.
The 2026 and 2027 figures don’t make the stock look cheap, but if the sales estimates look achievable, the stock could rally. We’re nearly halfway through 2026 already, and the stock could start pricing in next year’s figures soon. Investors will be looking at upcoming earnings reports to see whether Cerebras has a chance of posting the figures management has suggested.
Cerebras has been the hottest IPO so far in 2026 – though SpaceX is likely to unseat it in June – and it resides in one of the most-watched sectors. If Cerebras can claim a significant piece of the action, its market cap – now about 1% of Nvidia’s – could multiply many times in value.
So, while Cerebras’ first couple weeks of public life have been rough, strong sales growth through the rest of the year may help propel the stock price higher. Although the stock looks too rich to me, I can foresee how investors will shoot it skyward if its results meet or exceed their expectations.
Regards,
James Royal, Ph.D.
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