(Reuters) - Chip startup Rivos said on Tuesday it raised $250 million in a funding round that will enable it to manufacture its first server chip geared for artificial intelligence.

Nvidia's ( NVDA ) combination of chips and CUDA software dominates the market for AI-related computing, and Nvidia ( NVDA ) gobbled up more than 80% market share of AI chips in 2023. But a host of startups and chip giants have started to launch competing products, such as Intel's ( INTC ) Gaudi 3 and Meta's inference chip - both unveiled last week.

Rivos is tight-lipped about the specifics of the product, but has disclosed that its plans include designing chips based on the RISC-V architecture, which is an open source alternative to the architectures made by Arm, Intel ( INTC ) and Advanced Micro Devices ( AMD ). Instruction set architectures such as RISC-V are the building blocks of semiconductor designs, and using the open source alternative means Rivos does not have to pay a license fee to Arm.

"RISC-V doesn't have a (large) software ecosystem, so I decided to form a company and then build software-defined hardware - just like what CUDA did with Nvidia ( NVDA )," said Lip-Bu Tan, founding managing partner at Walden Catalyst, one of Rivos' investors.

Santa Clara, California-based Rivos is in the process of designing a server chip that combines a central processing unit and AI accelerator component that will be optimized for large language models and data analytics. The company began with the software necessary to compile computer code to allow the chip to run a program and designed the processor around the software.

"Usually the chip companies do it the other way: build the silicon, and then build the software on top," CEO Puneet Kumar told Reuters in an interview. "We decided, as a company that we should first look at software."

Matrix Capital Management was the largest investor in the funding round that also included investments from Intel ( INTC ), MediaTek ( MDTTF ) and Dell Technologies ( DELL ).