UK taxpayers buy into the AI chip boom as the Sovereign AI Fund joins Fractile's $6.5bn round
What's the deal? The UK government's taxpayer-backed Sovereign AI FundDealroom has a profile for this one. Try Dealroom → has joined the latest funding round of London AI-chip startup Fractile, the Telegraph reported on 1 November, citing sources. The round is expected to raise around $700m and value Fractile at about $6.5bn, a sharp jump from roughly $1bn earlier this year, and could be announced as soon as next week. Fractile and the government declined to comment.
Who else is in? The round is led by Lightspeed and Redpoint, with Thrive Capital also investing; Founders Fund backed the company earlier. According to the Telegraph, the Sovereign AI Fund, which typically invests between £1m and £10m per deal, came in at a slightly lower valuation than the final $6.5bn. The size of its stake has not been disclosed.
About the fund: Sovereign AI was set up earlier this year with £500m of public money to back home-grown AI companies, and received an extra £60m for direct equity investments in last week's Budget. It is chaired by Balderton Capital partner James Wise and run by venture capitalist Suzanne Ashman, the Telegraph reports.
How was it priced? Fractile has not formally announced the round, but Companies House filings show about £577.4m of new Series C shares allotted between 9 September and 23 October, in tranches. Most of the money, £392.2m, went in as Series C-3 at the top price of £1,452.35 a share; £147.8m went in as C-1 at £801.54, just over half that price; and £37.4m came in as C-2 at £707.25, from earlier investments converting into shares. That is about $774m in total, Tech Funding News reports.
What does it build? Fractile, founded in 2022 by Oxford robotics researcher Walter Goodwin, designs AI-inference chips that put memory (SRAM) right next to the compute, a different approach to the GPUs made by market leader Nvidia. It has an initial deal to sell Anthropic about $250m of chips and expects to deploy in data centres in 2027. The new round follows a $220m Series B just five months earlier.
What could go wrong? A public fund is buying into a hardware company that has not yet shipped chips in volume, after a roughly sixfold rise in its valuation within months and at a time when some investors are pulling back from the largest AI funding rounds. As the Telegraph notes, the deal comes despite concerns about the sustainability of AI giants' spending on chips and data centres, which has driven up the valuations of the companies that supply them.
The signal: Britain wants a stake in its own AI hardware champions rather than watching US funds take the whole cap table. It fits a wider shift: deep tech and life sciences now take 61% of European venture funding, up from 41% in 2025, according to Dealroom data.
Sources: Telegraph, Telegraph (via AOL), Companies House, Tech Funding News, Seb Johnson on X, Dealroom: Deep tech in Europe
Image credit: IBM Research
