NVIDIA-supported cloud service provider Lambda raises $350 million, plans for IPO this year

Lambda, a cloud service startup supported by NVIDIA, is in talks to raise at least $350 million to bolster its capital reserves ahead of an initial public offering (IPO) later this year. As an emerging cloud service provider focused on leasing NVIDIA AI chips, Lambda's fundraising process highlights the ongoing interest of capital markets in the AI computing infrastructure sector.

According to sources familiar with the matter, Mubadala Capital, a sovereign wealth fund from the UAE, is negotiating to lead this round of financing. Under the proposed terms, this round of financing is structured as convertible notes, granting new investors the right to purchase shares at a discount of about 20% to the Lambda IPO price. If this deal is finalized, it will be the latest example of a UAE government-backed fund's investment in a series of AI-related ventures.

The terms of this financing impose clear time pressure on Lambda's IPO process. Sources indicated to the media that if Lambda fails to go public within a year, the company will be forced to compensate participating investors with millions of dollars in additional equity or pay cash interest. This structural arrangement is designed to incentivize the company to accelerate its transition to the public market and secure the certainty of an IPO.

This financing aims to provide funding support for Lambda's planned IPO in the second half of this year, which has been slightly delayed from the previously scheduled first half. With the surge in demand for AI computing power, Lambda, as a key player in the NVIDIA ecosystem, will have its IPO process and valuation level viewed as an important barometer of investor confidence in the long-term prospects of AI infrastructure.

Signing the "Military Order": Compensation if Not Listed Within a Year

According to media outlet The Information, this financing not only provides Lambda with a financial buffer ahead of its IPO but also secures investors' participation rights in the listing. Sources indicated to the media that institutions participating in the convertible note investment will have the opportunity to continue investing in the IPO.

However, the terms themselves have a clear betting nature. In addition to providing a discount on the IPO price, if Lambda fails to complete its listing within a year, punitive clauses will be triggered. This structure reflects investors' demands for liquidity while also showing the capital market's focus on the timeline for AI startups to go public.

Concerns Behind $520 Million Annual Revenue: High Growth Accompanied by High Losses

Financial data shows that Lambda is in a phase of rapid growth coupled with high investment. In the year ending September 2025, Lambda achieved over $520 million in revenue. The company recently informed investors that third-quarter sales grew by 80% year-on-year.

Despite strong revenue growth, Lambda is still in a "burning cash" expansion phase, with a net loss of approximately $175 million during this period. The company was founded in 2012 by brothers Michael Balaban and Stephen Balaban, and its core business is leasing dedicated servers to AI developers, directly competing with tech giants such as Amazon Web Services, Microsoft, and Google

NVIDIA is Both a Financial Backer and a Customer

The relationship between Lambda and NVIDIA is complex and close, with the latter not only being an early supporter but also one of its largest customers recently. Last summer, NVIDIA agreed to spend $1.3 billion over four years to lease 10,000 of its own AI chips to Lambda and signed another leasing agreement worth $200 million (to lease an additional 8,000 chips).

In addition, Microsoft signed a multi-billion dollar server leasing agreement with Lambda last fall. NVIDIA supports such "new cloud" vendors to hedge against the risk of cooling demand from large cloud service providers. Compared to large cloud vendors that tend to customize, NVIDIA prefers companies like Lambda, as they are more inclined to directly use the full-stack solutions of hardware, networking equipment, and software provided by NVIDIA.

Stock Price Fluctuations of Benchmark Company CoreWeave

The public market's valuation of Lambda may reference its competitor CoreWeave. Also heavily backed by NVIDIA, CoreWeave went public in March 2025. Although its stock price has risen over 90% from its issue price, it has experienced bumpy trends in recent months.

Since October of last year, CoreWeave's valuation has shrunk by about half due to investor concerns over its massive debt burden and delays in data center projects. The performance of Lambda's pre-IPO financing and subsequent listing will largely depend on investor sentiment towards such heavy-asset, high-growth AI infrastructure companies.