Ayar Labs Closes $500M to Scale Optical Interconnects for AI

San Jose: Ayar Labs closes a $500 million Series E round, pushing its valuation to $3.75 billion. The funding accelerates mass production of the company’s co-packaged optics technology. Co-packaged optics, or CPO, replaces traditional copper chip interconnects with light-based connections.

Neuberger Berman leads the round alongside NVIDIA, AMD, ARK Invest, and Insight Partners. The Qatar Investment Authority, Sequoia Global Equities, and MediaTek also participate. Total funding for the San Jose startup now stands at $870 million.

Ayar’s flagship product, the TeraPHY optical engine, delivers up to 8 terabits of data per second. The chip integrates directly into graphics processing units and AI accelerators. That design reduces power consumption while dramatically increasing bandwidth density.

CEO and co-founder Mark Wade says copper has hit its limits. “Co-packaged optics overcomes these barriers, enabling thousands of GPUs to operate as a unified system,” he says.

The raise arrives one day after NVIDIA committed $4 billion to photonics manufacturers Coherent and Lumentum. That parallel investment signals a broad industry push toward optical networking infrastructure. Analysts view CPO as essential for AI clusters running 10,000 or more GPUs simultaneously.

Ayar plans to expand manufacturing capacity in the US and at its new Hsinchu, Taiwan office. Commercial deployments are expected to ramp steadily through 2028.