Dutch cloud company HyperAI has sued UK chipmaking startup Graphcore over breach of contract, accusing the British startup of walking away from a cloud partnership deal and failing to deliver technical support that it had paid for.
HyperAI, founded in the Netherlands in 2021, filed the case in the Amsterdam courts late last year, CEO and cofounder Andrew Foe tells Sifted.
A spokesman for Graphcore said: “Graphcore does not comment on pending litigation matters, other than to state that we vigorously dispute HyperAI’s meritless claims.”
HyperAI chose to build its cloud compute infrastructure with Graphcore’s technology in February 2021, making a payment of €121k to the Bristol-based chipmaker for hardware, software and a “three-year support package,” with the latter costing €23k, according to an invoice seen by Sifted. The purchase was made through a German intermediary called Boston Server & Storage Solutions.
But Foe says that Graphcore then reneged on the deal, by telling HyperAI it could no longer enter into a cloud partnership and provide technical support for its systems. This, he argues, made the whole investment into the technology worthless, prompting him to write to Graphcore CEO Nigel Toon asking for a full refund and a return of the hardware.
Foe says he did not receive a reply to the request, adding that the failed relationship has had a “profound financial impact” on his company.
The Bristol-based chipmaker is also facing challenges and is reported to be in talks with a potential buyer. Graphcore’s accounts show that the unicorn’s revenues hit just $2.7m in 2022, falling 46% from the previous year “due to lower hardware sales to key strategic customers”. Losses also rose 11% to $204.6m.
Getting into bed with Graphcore
Foe tells Sifted he wanted to build HyperAI’s cloud infrastructure with Graphcore hardware, ahead of US giant NVIDIA’s chips, because he’d become convinced by their superior performance and had grown excited at the prospect of supporting a fellow European startup.
“[Graphcore’s] was interesting technology, NVIDIA was the dominant player … but they were a challenger, a startup, and I saw a good story there, we could help each other and try to get a name in the market,” he says. “We just thought that we would get more value as compared with NVIDIA, because with NVIDIA we would be just one of their many partners.”
HyperAI’s contact with Graphcore began in February 2021 when Foe gave a presentation of HyperAI’s plans for its AI cloud service, including a roadmap for the next few years.
A year later, in February 2022, Foe says he agreed with Graphcore that the two companies would start work towards a cloud partnership agreement. The goal was to announce it at the next edition of CloudFest, the world’s largest cloud industry event, held on March 22-24 that year.
The deadline was missed, Foe says, forcing HyperAI to delay the launch of its cloud computing platform, which eventually went live on December 2, 2022.
When things turned sour
“When we launched, it all seemed great,” he remembers, pointing out that a member of Graphcore’s team reposted HyperAI’s announcement on LinkedIn.
But three days after the launch of HyperAI’s platform, Graphcore told Foe that it would not support the Dutch startup as a cloud partner. He says the reason given was that Graphcore had already signed an exclusive cloud partnership deal with another company — Luxembourg-based G-Core — which was publicly announced 10 months earlier, in February 2022.
According to Foe, Graphcore told HyperAI that it was going through a difficult time and laid off staff, including engineers, which prevented the company from supporting HyperAI technically.
Foe says he then told Graphcore that its hardware was useless to his company without a cloud partnership, and that a Graphcore representative agreed and said he would look into selling the hardware on to G-Core or take it back.
In subsequent calls and emails, seen by Sifted, the Graphcore representative claims their company did not discuss “any cloud partnership nor have the intention for a partnership” with HyperAI.
Trying to make amends
In an attempt to solve the dispute, Foe sent a formal letter to Graphcore’s CEO Nigel Toon on December 28, 2022, resulting in an hour-long meeting between the two executives on January 6, 2023. During the conversation, Foe says that Toon said “all of Graphcore’s partners were equal and at that moment there were no preferred partners,” adding that he had had to fire lots of engineers and would not be able to offer technical support to HyperAI.
The two CEOs ended the call agreeing that the two companies would draft a new working contract and a mutual NDA agreement to share a technical roadmap for working together.
The NDA was not signed in the end and Toon rejected HyperAI’s contract proposal, arguing it was too broad and lacking in details on the technical support HyperAI would need, according to Foe.
In February 2023, Foe sent another letter to Toon requesting a full refund, which Foe says went unanswered. The Dutch cloud company then filed a lawsuit and has since become a Nvidia partner.
Foe says the fallout with Graphcore has had a big financial impact on his company. “It knocked the wind out of our operation because that’s why we couldn’t invest in anything else for a little while,” he says.
