AI Chipmaker Cerebras Stock Plunges 20%! CEO Blames 'Misunderstood' Margin Outlook

Shares of AI chipmaker Cerebras Systems experienced a dramatic fall on Wednesday, plummeting nearly 20% despite the company reporting better-than-expected first-quarter earnings just the day before. This significant drop, which saw the stock approach its initial public offering (IPO) price, has left investors reeling.

The unexpected downturn was triggered by the company's forecast of a narrower gross margin in its core business. Cerebras guided for a full-year margin of 38% to 41%, a notable decrease from the 47% reported in the first quarter. This outlook, presented in their inaugural earnings report since going public, appears to have spooked the market.

Cerebras CEO Andrew Feldman quickly addressed the situation, telling CNBC that investors had "misunderstood" the company's margin guidance. Feldman clarified that the AI chipmaker plans to temporarily rent back some equipment from one of its largest customers. This strategic move is intended to make more capacity available sooner, while Cerebras focuses on building and deploying its own data center capacity. The company acknowledged during its earnings call that this temporary arrangement would indeed cut into profit margins for the current year.

Despite the stock's performance, Cerebras's first-quarter financial results showed strong growth. The company reported robust revenue of $193 million, marking an impressive 94% increase year-over-year. Furthermore, its net loss narrowed significantly to $14 million, down from $23.9 million in the same period last year. The company's unique situation is also compounded by a staggered lock-up expiration, with some shares becoming available for trading this week, potentially adding further volatility.

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