Co-Packaged Optics Startup Ayar Labs Raises $500M at $3.75B Valuation

Quick Facts

• Ayar Labs raised $500 million Series E at $3.75 billion valuation with backing from Nvidia, AMD, and others
• Company’s TeraPHY optical engine delivers 8 Tbps bandwidth using light instead of copper interconnects
• Funding will scale production capacity as market for on-chip optical I/O matures between 2026-2028

Ayar Labs Inc. secured $500 million in Series E funding at a $3.75 billion valuation, bringing the co-packaged optics startup’s total outside funding to $870 million. Neuberger Berman led the round with participation from Nvidia Corp., Advanced Micro Devices Inc., and MediaTek Inc.

The Santa Clara-based company develops co-packaged optics hardware that transmits data packets as light rather than electrical signals through copper. The technology addresses power and bandwidth limitations in AI infrastructure as companies build larger GPU clusters.

“AI infrastructure is hitting a power wall driven by interconnect inefficiency,” said Mark Wade, CEO and co-founder of Ayar Labs. “As bandwidth demands explode, copper becomes the bottleneck – consuming too much power and limiting AI throughput per watt and per dollar.”

Ayar Labs’ TeraPHY optical engine represents the industry’s first Universal Chiplet Interconnect Express optical interconnect chiplet, delivering 8 terabits per second of bandwidth. The solution combines silicon photonics with advanced packaging from TSMC and can deliver up to 100 Tb/s of bandwidth per accelerator when integrated with partner Alchip Technologies’ electrical interface.

The funding comes as competition intensifies in optical interconnect technology. Marvell completed its $5 billion acquisition of startup Celestial AI in December 2025, while private companies like Lightmatter claim 114 Tbps bandwidth from single packages using different approaches.

New investors include Alchip Technologies, ARK Invest, Insight Partners, Qatar Investment Authority, and Sequoia Global Equities. They join existing strategic investors AMD Ventures and Nvidia alongside financial institutions like Advent Global Opportunities and Light Street Capital.

Wade predicts the market for on-chip optical I/O will mature between 2026 and 2028, with proliferation across industries afterward. The company estimates the photonics IC market could exceed $38 billion by decade’s end, with annual chiplet shipments surpassing 100 million units.

Ayar Labs will use proceeds to add production capacity, enhance testing workflows, and expand internationally, including growing its new Hsinchu, Taiwan office. The company first unveiled its CPO solution in September 2025 and works with TSMC on advanced packaging and process technology.

Former Intel CEO Pat Gelsinger, now an Ayar Labs board member, said he believes the scale of modern AI infrastructure has changed the equation for optical interconnects after early predictions about copper’s demise proved premature. The company sees potential for an initial public offering in the near future.

Read more: Co-packaged optics startup Ayar Labs raises $500M round backed by Nvidia, AMD