Nvidia-backed Fireworks hits $17.5 billion valuation as companies pursue cheaper AI models

Fireworks founders pose for a photo at the startup’s headquarters in San Mateo, California. From left in front row: Chenyu Zhao, CEO Lin Qiao and Benny Chen. Back row: James Reed, Pawel Garbacki, Dmytro Ivchenko and Dmytro (Dima) Dzhulgakov.

Fireworks

The cost of the latest artificial intelligence models is increasingly breeding anxiety among finance executives, who have started directing employees to consider open-source alternatives.

That’s boosting cloud startup Fireworks, which competes with Amazon and Google to host models that developers can weave into applications. The Nvidia-backed company said Thursday that it has exceeded $1 billion in annualized revenue, five times what it had last year, and it has now raised a $1.5 billion round at a $17.5 billion valuation.

“We’re seeing super-linear demand,” Lin Qiao, Fireworks’ co-founder and CEO, told CNBC in an interview at the company’s headquarters in San Mateo, California. “This is a once-in-a-lifetime opportunity to have this kind of market.”

Fireworks is much smaller than Anthropic and OpenAI, which investors have valued above $800 billion each this year, nor is it close to the top names in technology, whose market capitalizations are counted in the trillions. But the startup’s revenue milestone suggests that companies aren’t completely satisfied with the models coming out of the top labs.

The achievement also presents new evidence that Amazon, Microsoft and Google are not totally dominating in cloud computing.

Shares of easy-to-use cloud infrastructure vendor DigitalOcean are up 149% so far this year as growth has accelerated. CoreWeave, which rents out Nvidia graphics processing units, or GPUs, raised $1.5 billion in an initial public offering last year and is now worth $42 billion.

By managing computing infrastructure for models, Fireworks does business in the inference cloud market, alongside startups such as Baseten and Together AI. It’s also started providing GPUs for training AI models, like neoclouds CoreWeave, Lambda and Nebius.

Rather than go it alone, Fireworks has started forming alliances.

In March, it announced a partnership with Microsoft, which fields its own Foundry service for running open models. The arrangement allows customers of the Windows and Office company to draw on models through Fireworks, which relies on computing power from more than 20 suppliers, including Microsoft.

“Through Microsoft we can get much bigger reach,” Qiao said.

Fireworks gives developers an easy way to adopt models from Chinese companies such as DeepSeek, MiniMax and Z.ai. Open-weight models OpenAI released last year are also available. The idea is for clients to bring their own data that frontier labs don’t have and refine models until they deliver state-of-the-art performance for specific tasks, Qiao said.

While Anthropic and OpenAI serve up “generalized intelligence,” Fireworks can unlock “specialized intelligence,” she said.

The argument might sound familiar to those following the discourse of technology figureheads.

Microsoft CEO Satya Nadella wrote in a Sunday blog post that “a company should be able to use a model without giving up the knowledge that makes it unique.”

Nadella was referring to Palantir CEO Alex Karp‘s remarks on CNBC earlier this month.

Technical customers “want to know they own the means of production,” Karp said. “It’s not being transferred to someone else.”

Dollars and cents are a factor, too. Cryptocurrency exchange operator Coinbase has been adopting cheaper models where it makes sense, CEO Brian Armstrong wrote in a June X post.

“Our cost compared with the equivalent-quality closed model is five to 10 times cheaper,” Qiao said.

A former Meta director, Qiao and six of her co-founders started Fireworks in 2022. The company employs around 200 people. Qiao expects the head count to reach 600 by the end of 2026.

“This is the year when we’ll really hit the gas,” Qiao said.

Fireworks hired former Salesforce executive George Hu as its president in April. The startup plans to assemble a formidable sales team after years of having customers sign themselves up. The new money will also help Fireworks obtain more GPUs and hire more technologists.

Developers are increasingly counting on Fireworks to handle requests.

Fireworks now handles 40 trillion AI tokens per day, Qiao said. Google disclosed in May that its AI models were processing about 19 billion tokens per minute for developers, implying more than 27 trillion per day. OpenAI announced in March that its developer tools were working through 15 billion tokens per minute, which would suggest about 22 trillion per day. Each token equates to about three-quarters of a single word.

As of last year, about half of Fireworks’ revenue came from AI coding startup Cursor, which has become less dependent on OpenAI and Anthropic and built a custom model named Composer.

“We are much more diversified right now,” Qiao said. In June, Elon Musk‘s SpaceX agreed to acquire Cursor in a $60 billion stock deal, with the transaction set to close this quarter. Other Fireworks clients include Elastic, GitLab and MongoDB.