Stripes-led investors have backed AI chip startup Etched with about $500 million in new funding, according to people familiar with the matter, as the company works to challenge Nvidia (NASDAQ:NVDA) in the rapidly expanding market for artificial intelligence processors. The round included participation from Peter Thiel alongside Positive Sum and Ribbit Capital, and values the San Jose, California-based company at roughly $5 billion, the people said, noting the financing has not yet been publicly announced.

Following this raise, Etched has secured almost $1 billion in total funding, according to one of the people. The company has been developing an AI chip known as Sohu, aiming to take advantage of surging demand for computing power used to train and run artificial intelligence models. Etched has partnered with Taiwan Semiconductor Manufacturing Co.’s (NYSE:TSM) Emerging Businesses Group to manufacture the chip and has hired engineers with prior experience at companies such as Cypress Semiconductor and Broadcom.

The funding arrives as Nvidia continues to dominate the AI accelerator market, even as new startups attempt to carve out alternatives. Nvidia has said this month that demand for its products is still increasing and has projected more than half a trillion dollars in sales from data center operators by the end of 2026. Against that backdrop, Etched’s growing capital base and backing from established investors could be seen as an early effort to compete in a market where demand is expanding, but competitive pressure remains intense.