Aug 13 (Reuters) - Cerebras Systems ( CBRS ) slumped over 18% premarket on Thursday after it missed key estimates despite soaring cloud revenue, raising doubts about the ability of its AI chips to challenge Nvidia ( NVDA ).

Expectations were high for AI-linked companies including Cerebras and networking equipment maker Cisco ( CSCO ), given the strong run-up in shares driven by Big Tech's ballooning spending, set to cross more than $740 billion for this year.

Here are some details:

-- Cerebras, in its second earnings report as a public company, offered a mixed picture as it increasingly derived revenue from cloud computing rather than its AI chips.

-- The AI chips business had helped position Cerebras as a challenger to Nvidia ( NVDA ) and fueled a 41% rise in shares from the IPO price of $185.

-- The Sunnyvale, California-based company's cloud business roughly quadrupled to $126 million, versus the year-ago quarter.

-- But its hardware sales, including AI chips, declined to $54.1 million from $70.3 million a year ago.

-- Second-quarter adjusted gross margin fell to 40.6% from 46.5% in the prior quarter, while revenue missed analysts' estimates despite a higher annual outlook.

-- "Execution remains the key debate given the scale and speed of the capacity build required to support the ramp," said analysts at Morgan Stanley.

-- Citi and Mizuho cut their price targets slightly; the median target as per estimates compiled by LSEG implied an upside of 15% from the previous close.

LOFTY EXPECTATIONS FOR AI INFRASTRUCTURE COMPANIES

-- Separately, shares of Cisco Systems ( CSCO ) fell over 6% as its outlook fell short of lofty expectations tied to its rise as a beneficiary of the AI data center buildout. The stock has gained more than 60% this year.

-- Cisco ( CSCO ) expects $7.5 billion in revenue from AI infrastructure orders from hyperscalers in fiscal 2027.