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It’s not uncommon for the stock price of an initial public offering (IPO) to drop 50% from its first-day close. In fact, 38.5% of IPO stocks since 1975 saw their share price cut in half after three years of public trading, according to data from economist and University of Florida professor Jay Ritter.
So, the 52% drop in Cerebras (NASDAQ: CBRS), one of the hottest artificial intelligence IPOs of 2026, isn’t too out of the ordinary. The good news for investors is that analysts are still extremely bullish on the stock, with a median price target roughly double its current price.
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Here’s a closer look at Cerebras, what caused its drop, and whether the analysts covering it are right.
The big drop in the big chipmaker
Cerebras made its market debut in May, closing its first day of trading at $311.07 per share, 68% above its IPO price. The big pop in its price reflects excitement around the company, which designs multi-core systems that fill an entire 12-inch silicon wafer. Cerebras’ chip architecture aims to solve the biggest challenge in AI inference speeds, transferring data between chips, by keeping everything on a single piece of silicon.
The technology attracted the attention of OpenAI, which signed a deal to use Cerebras’ chips for inference. Amazon has also agreed to use Cerebras chips in its Amazon Web Services systems, pairing them with its own Trainium chips to use the best chips available for specific tasks.
But the excitement around Cerebras didn’t last long. The stock sold off throughout May and June, dipping below its IPO price. While the chipmaker recovered somewhat alongside the rest of the industry in August, it disappointed investors with its second-quarter earnings report. That sent the stock plummeting 20%.
The report showed Cerebras rapidly transitioning from selling its hardware directly to customers, as in its deal with Amazon, to standing up its own cloud computing service using its chips, as in its deal with OpenAI. Cloud revenue climbed 281% year over year while hardware sales dropped 23%. Cloud now accounts for two-thirds of revenue, up from one-third last year. Analysts were expecting hardware sales to hold up better.
The next big drop came when reports indicated that OpenAI is running its newest “Ultrafast” model using Nvidia GPUs instead of Cerebras’ chips. That cast doubt on Cerebras’ ability to execute on its contract with the frontier AI lab. OpenAI CEO Sam Altman reassured investors that Cerebras remains a key partner, but the news highlighted the significant customer concentration risk for Cerebras.
