By Brian Lantier, CFA
OTC:BRCHF
READ THE FULL BRCHF RESEARCH REPORT
We are initiating coverage of BrainChip Holdings (OTC:BRCHF) with a valuation of $0.75 per share. BrainChip is the first company to offer a commercial neuromorphic processor and the associated IP to the market. The company’s Akida IP brings artificial intelligence (AI) tools to the “edge” with on-device computing and “one-shot” learning capabilities. The company licenses its intellectual property to OEMs, semiconductor designers and semiconductor manufacturers.
On-device Artificial Intelligence or “Edge AI” holds significant promise as a low-power alternative to Cloud AI tools currently in the marketplace. Additionally, by moving the computation to the devices, responsiveness improves as latency is reduced in the system. On-device computing comes with some trade-offs, but for many simple applications it has significant potential.
Neuromorphic computing is a complete shift in the way computers process information to mimic the process of human brain. This nascent industry remains principally the domain of researchers, but it appears to be on the verge of a significant inflection point as the many consumer applications are expected to come into the market over the next five years. Commercial applications of neuromorphic computing have been limited prior to 2022 to a small number of custom applications, but consumer demand for more automation in their lives requiring more onsite processing has sparked increased interest in the sector. BrainChip launched a commercial product for this market in 2021 while most of their competitors (including major technology companies, chip manufacturers and startups) are still refining their approach and thus, BrainChip is the only commercially available IP in this market today.
The combination of hardware and software advances has allowed researchers to begin working on the third generation of Artificial Neural Networks (ANNs) called Spiking Neural Networks (SNNs) which aim to replicate the processing that occurs inside of the human brain. SNNs build models that attempt to reflect the processing methods of individual neurons. SNNs can be implemented as a software solution on a traditional CPU or through unique chipsets like BrainChip’s Akida and BrainChip’s IP. By processing signals as they come in based on past information the system has “learned”, the systems can draw conclusions without requiring all the available data, rather only enough data necessary to draw a conclusion.
Neuromorphic architecture and chips typically use a fraction of the power required by traditional processors – in testing they have proved to be up to 1000 times more power efficient – because they are only running computations on data that is present and not running computations when there is no input.
There is a pressing need in the artificial intelligence industry to process information in near real-time to enhance safety or to increase user satisfaction. Consumers have become accustomed to interacting with devices that connect to cloud and provide rapid responses (think of Amazon’s Alexa or Apple’s Siri for example) but in mobile environments there is often system congestion which is only expected to become more problematic. While this may be a mere inconvenience when it is speech recognition in a vehicle, if you are in an autonomous vehicle relying on identifying objects using AI, any system lag is unacceptable and that may lead to an increase in demand for more processing of data to be done on-device.
BrainChip intends to replicate the business model utilized by ARM Holdings – licensing the company’s IP and realizing royalty fees on each unit shipped with their technology – which if successful can lead to a very profitable business model in the long run.
The research report summarizes the company’s competitors, partnerships and discusses some the challenges still facing the company. Our valuation is principally based on a combination of investments made in emerging semiconductor technologies, ARM Holdings and our assumptions for rapid growth over the next 2 years for BrainChip. Based on this work we arrived at a valuation of $0.75 per share.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.