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

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 .