London-based AI chip start-up Fractile is negotiating a $200 million funding round, aiming to challenge Nvidia's dominance in the $4.3 trillion chip market. Backed by former Intel CEO Pat Gelsinger and Nato's Innovation Fund, the company seeks to raise new capital at a $1 billion valuation through discussions with investors including Accel. This follows a similar $220 million raise by Olix, another UK AI chip venture.

Fractile's strategy involves using static random access memory (SRAM) technology, distinct from Nvidia's GPUs, to improve AI inference speed and cost. The fundraising occurs amid renewed investor interest in Nvidia alternatives, spurred by the chip giant's recent $20 billion acquisition of Groq and its launch of a new AI-dedicated chip. However, the UK chip sector has seen mixed results, with Graphcore's acquisition by SoftBank for under $600 million highlighting past volatility.

Fractile, led by Oxford PhD Walter Goodwin and staffed by veterans from Nvidia and Imagination, plans to invest £100 million over three years to expand in London and Bristol.