Ayar Labs raises $500M to replace copper with light in AI chips

What's the deal? Ayar Labs has raised $500M in a Series E round, lifting its valuation to $3.75–$3.8B and bringing total funding to $870M. The chip startup, backed by Nvidia and AMDDealroom has a profile for this one. Try Dealroom →, makes co-packaged optics (CPO) technology that replaces copper wiring in semiconductors with fibre optics to cut power consumption and boost bandwidth.

The round was led by Neuberger BermanDealroom has a profile for this one. Try Dealroom →, which takes a board observer seat and has signalled it sees a near-term IPO opportunity for the company.

Why now? As AI shifts from training large models to running inference at scale, chip efficiency has become a critical bottleneck. Ayar says its CPO technology delivers four to 20 times the computing throughput per watt compared with copper-based alternatives.

The round also follows Nvidia's separate $4B commitment to photonics firms Coherent and LumentumDealroom has a profile for this one. Try Dealroom → — a signal that optical interconnects are moving from research curiosity to infrastructure priority. Ayar is now entering high-volume manufacturing, expanding its Hsinchu, Taiwan office and doubling its San Jose headquarters.

What could go wrong? Silicon photonics has a long history of overpromising. Former Intel chief executive Pat GelsingerDealroom has a profile for this one. Try Dealroom →— now on Ayar's board — acknowledged he predicted copper's demise 23 years ago, only to be "two decades too early."

Competition is also building. Lightmatter is pursuing a similar CPO strategy, and MarvellDealroom has a profile for this one. Try Dealroom → recently paid roughly $3.25B for Celestial AI. Ayar must execute on high-volume production while rivals are well-capitalised and major chip companies spread bets across multiple players.

The signal: Ayar's raise, combined with Nvidia's $4B photonics push, marks a turning point for optical interconnects — long promising but peripheral. With data centre power constraints tightening and GPU cluster sizes growing, copper's physical limits are no longer a future problem.

The money flowing into this space suggests investors believe the infrastructure layer of AI is about to be rebuilt around light, not electrons.

Sources:
WSJ
Reuters
The Register

A.M.