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Artificial intelligence (AI) infrastructure provider Cerebras Systems (NASDAQ: CBRS) went public last month and popped impressively on its first day of trading on May 14.

Cerebras stock popped an impressive 68% on its first day, rising significantly from its initial public offering (IPO) price of $185. However, the stock has lost 41% of its value since that pop. What's more, the company's first-quarter 2026 results, which were released on June 23, failed to arrest the slide due to disappointing revenue guidance and margin concerns.

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Analysts, however, remain confident of a turnaround in Cerebras' fortunes. They anticipate a 65% surge in Cerebras stock in the coming year, as evidenced by its 12-month median price target of $300. Notably, 10 of the 11 analysts covering Cerebras rate it as a buy. So, should you capitalize on the recent slide in this AI stock and consider buying it in anticipation of solid long-term gains?

Let's find out.

Cerebras differentiates itself from other AI chip companies by packing 4 billion transistors into a single wafer-sized chip. For comparison, companies like Nvidia and Broadcom break down silicon wafers into graphics cards and custom AI processors. Cerebras claims that its wafer-sized chip can eliminate memory-related bottlenecks by packing in a whopping 44 gigabytes (GB) of random-access memory (RAM) and offer significantly faster transmission speeds.

The company claims that it can offer 28x more computing power compared to Nvidia's B200 graphics processing unit (GPU), while offering 15x faster inference performance as compared to GPU-powered clouds. The good news for Cerebras is that its chips are finding favor among companies such as OpenAI and Amazon.

It has an agreement with OpenAI to deploy 750 megawatts (MW) of its chips to run inference workloads "over the next several years," valued at more than $20 billion. Amazon, meanwhile, has also entered into a multi-year partnership with Cerebras to accelerate inference workloads on Amazon Web Services, though the financial details of the deal haven't been disclosed.

These deals should help Cerebras maintain its impressive growth rate. The company's Q1 revenue increased by 92% year over year to $191.3 million. Cerebras expects an 88% year-over-year increase in revenue in the current quarter to $194 million. The company has guided for a 69% jump in full-year revenue to $860 million, which seems to have disappointed investors.

Analysts would have been satisfied with a 2026 revenue guidance of $824.8 million, but the gradual slowdown in growth the company is indicating over the course of the year hasn't gone down well with investors. Additionally, the company's non-GAAP gross margin forecast for 2026 is another reason why Cerebras stock fell 20% following its earnings report.

Cerebras reported a non-GAAP gross margin of 47% in Q1. However, it expects to report a non-GAAP gross margin of 38% to 41% for the full year. Cerebras attributes this gross margin pressure to its strategy of renting its own chip systems back from an existing customer to fulfill its contractual backlog. Cerebras points out that this margin pressure will be temporary and should ease as it brings its own data center capacity online.

Cerebras CEO Andrew Feldman pointed out on the earnings call that the company is engaged with data center builders in North America, Europe, and the Middle East. As a result, Cerebras is confident of adding new capacity quickly going forward. Once that happens, the company's margins should start getting better. Throw in the massive backlog of more than $20 billion that Cerebras reported last quarter, and it won't be surprising to see the company quickly moving toward profitability. This is what analysts are anticipating.

The biggest problem with Cerebras right now is its valuation. The stock trades at 65 times sales, and the gradual slowdown it is forecasting in top-line growth for the rest of the year doesn't justify that multiple. The U.S. tech sector, for comparison, has an average price-to-sales ratio of 9.1.

However, as Cerebras adds more data center capacity using its proprietary chips, it should be able to step on the gas once again. Not surprisingly, analysts are expecting a significant acceleration in its top-line growth in 2027 and 2028.

Cerebras can indeed achieve such stunning growth, given its backlog, thereby justifying its premium valuation. Let's say it trades at even 15 times sales after three years and achieves $7.4 billion in revenue in 2028, its market cap could increase to $111 billion. That suggests potential upside of 175% from current levels.

So, investors looking for a growth stock can consider accumulating Cerebras following its sharp pullback in recent weeks, as it can bounce back and deliver healthy gains over the next three years.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Broadcom, and Nvidia. The Motley Fool has a disclosure policy.

Where Will Cerebras Stock be in 3 Years? was originally published by The Motley Fool