Cerebras secured a $20 billion infrastructure contract with OpenAI for specialized AI inference hardware and deployment.

Cerebras Systems' stock tumbled over 11% in overnight trading on Tuesday, following the chipmaker's first quarterly report since its initial public offering last month. Though revenue nearly doubled and exceeded expectations, the adjusted loss was wider than anticipated.

Cerebras revealed that its supply agreement with OpenAI, announced in January, is worth $20 billion. The ChatGPT maker has contracted Cerebras for 750MW of ultra-low-latency AI compute capacity, with deliveries scheduled in multiple tranches through 2028. The company operates Cerebras Inference Cloud, where customers rent AI compute powered by Cerebras chips.

This development is significant for investors as the company seeks to broaden its customer base and address concerns about revenue concentration. The UAE-affiliated customers, including G42 and Mohamed bin Zayed University of Artificial Intelligence, accounted for approximately 86% of the company's revenue last year, according to its IPO filing.

However, analysts question whether the situation has truly improved. "Concentration did not go away; it rotated," said Patrick Moorhead, chief analyst at Moor Insights. "The answer is a $20B-plus, 750MW commitment to one customer, OpenAI, who also lent Cerebras $1B and gets paid partly in warrants. Trading G42 risk for OpenAI risk could be looked at as a bigger single point of failure, not diversification, and most of the $24.6B backlog is that one contract."

Moorhead also highlighted margin pressures as a key concern: "The wafer-scale technology is real and genuinely differentiated on speed. The margin path, the cash burn, and the concentration are the questions that matter now."

Cerebras' first-quarter revenue rose 94% to $193.4 million, beating the FactSet analyst estimate of $181.2 million. Hardware revenue climbed 59% to $110.6 million, while revenue from cloud and other services nearly tripled to $82.8 million. However, the adjusted loss of $0.22 per share exceeded the $0.16 per-share loss target.

The company raised approximately $5.6 billion in its May IPO, driven by investor enthusiasm for its flagship Wafer-Scale Engine chip, purpose-built for AI models. As of the last close, CBRS stock was 23% higher than its IPO price.

On Stocktwits, retail sentiment for CBRS shifted to "extremely bullish" on Tuesday night, up from "bearish" the previous day, with 24-hour message volume rising over 1,800%. Investors and traders offered varied perspectives on the results and implications. One trader stated, "I waited for the price to come down and it did. ER was fine. I'm buying and holding." Another noted concerns about the warrant structure: "The only reason OpenAI was secured as a major future customer was by enticing them with penny warrants. Already on Day 1 as the company trades at $360/sh, those warrants are already worth $12B to OpenAI relative to the $20B+ in purchase commitments they made to Cerebras."

A third trader expressed skepticism about valuation: "Sure it's a great technology and company but sorry if I'm a bit skeptical on this 200x sales valuation for a company that hasn't demonstrated any real arms-length commercial viability for its products."

Traders indicated they would monitor the stock closely, particularly as the lockup window for insiders and pre-IPO investors opened. Nearly 13% of IPO shares became eligible for sale by insiders and early investors on Thursday, according to Barron's, with another 17% eligible to trade two days after the company reports second-quarter earnings.