Ayar Labs, a San Jose-based developer of co-packaged optics using optical I/O chiplets, has raised $500M in Series E funding led by Neuberger Berman. The company provides 5-10x higher bandwidth, 4-8x better power efficiency, and 10x lower latency than copper interconnects for AI scale-up systems. The capital will scale high-volume production, test capacity, and global operations including a new Taiwan office.
AI Power Walls Drive Optics Funding
The round closed amid surging investments in AI photonics, following NVIDIA's $4B commitments to Lumentum and Coherent in March 2026, and Marvell's $3.25B acquisition of Celestial AI for photonic interconnects in February 2026. Lightmatter raised $400M Series D in January 2025. Ayar Labs' UCIe-compliant TeraPHY chiplets address copper's bandwidth limits in GPU clusters.
Copper Fails Million-GPU Clusters
AI workloads waste 70% of compute time on data movement over copper links, which hit power and latency walls beyond racks. Current electrical interconnects cap at 1.6 Tbps per channel with rising signal loss. Hyperscalers need rack-scale fabrics for thousands of GPUs functioning as one system.
TeraPHY Enables 8 Tbps In-Package
Ayar Labs' TeraPHY Optical I/O Chiplet delivers 8 Tbps bi-directional bandwidth in standard packages using microring resonators and SuperNova light sources. Unlike Lightmatter's integrated photonic compute, Ayar focuses on modular, protocol-agnostic chiplets integrable with NVIDIA and AMD GPUs. Demonstrated 4 Tbps solutions publicly with partners like GUC and Alchip.
As Pat Gelsinger, former Intel CEO and Ayar Labs board member, noted:
"I proudly declared that the death of copper was upon us…but I was just two decades too early…What makes Ayar Labs so special is they’ve solved all these problems and are ready to go into high-volume production."
Investors Validate CPO Production Shift
Neuberger Berman leads with a board observer, signaling growth capital for scaling, joined by repeat investors NVIDIA, AMD Ventures, and new backers like Sequoia Capital and ARK Invest. Strategic corporates including MediaTek and Alchip underscore ecosystem integration for AI accelerators. Total funding reaches $870M at $3.75B valuation.
CPO Market Scales to $1B by 2034
Co-packaged optics market grows from $95M in 2025 to $1.05B by 2034 at over 35% CAGR, driven by AI data center demands. Silicon photonics hits $17B today with 12% CAGR. Competitors like Celestial AI ($589M raised) and Lightmatter ($850M) chase similar interconnect breakthroughs.
Photonics Experts Lead Photonics Revival
Co-founders include Vladimir Stojanovic, CTO with NanoSemi exit to MaxLinear, Stanford PhD, and UC Berkeley professor in photonic links. Mark Wade, CEO, brings 15+ years leading optics teams; Miloš Popović holds MIT PhD in integrated photonics. Recent hires like VP Engineering Sankara Venkateswaran bolster production readiness.
Funds Target Volume Manufacturing
Proceeds fund high-volume manufacturing ramps with TSMC ecosystem partners, UCIe interoperability demos, and Taiwan expansion. Partnerships with Intel Foundry, GUC for >200 Tbps XPUs, and Alchip for AI switches position Ayar for 2027 hyperscaler deployments.