Ayar Labs' light-in-the-package bet: first UCIe optical chiplet, $870M raised

Ayar Labs makes co-packaged optics for AI systems: TeraPHY optical I/O chiplets that sit inside multi-chip packages next to GPUs and accelerators, powered by SuperNova external light sources, replacing copper interconnects with light so chips can communicate over millimeter-to-kilometer distances at a fraction of the power.

That light inside the chip package would replace copper and pluggable optics for AI scale-up, and being first on the UCIe standard would make Ayar the default supplier.

Ayar Labs was founded in 2015 in San Jose, emerging from a decade-long DARPA-funded research collaboration among MIT, UC Berkeley and the University of Colorado Boulder aimed at embedding photonics in microprocessors. Co-founder Mark Wade, who became CEO in December 2023, said the company recognized the potential of co-packaged optics early. Early applications were defense and aerospace, but the AI boom shifted the market to data centers, where the power and bandwidth limits of copper links between GPUs became the bottleneck; Lockheed Martin backed the company in 2020, and GlobalFoundries joined as an early partner.

The company's wager gained credibility as AI scale-up architectures strained electrical interconnects. In December 2024 Ayar closed a $155 million Series D led by Advent Global Opportunities and Light Street Capital, with AMD Ventures, Intel Capital and NVIDIA participating, bringing total funding to $370 million. At OFC 2025 in San Francisco it announced the industry's first UCIe optical interconnect chiplet: an 8 Tbps TeraPHY optical I/O chiplet powered by a 16-wavelength SuperNova light source, combining silicon photonics with CMOS manufacturing so GPUs and accelerators could communicate as one large system; Jabil showed a module with 64 SuperNova sources aimed at petabit-scale bandwidth.

Ayar bet on data movement, not compute: power-hungry copper links would force optics inside the package, so it spent a decade making that manufacturable.

It backed the standard rather than a proprietary box: building the first UCIe optical chiplet meant any vendor's design could adopt it, which is why chipmakers AMD, Intel and NVIDIA all invested.

Proximity to real fabs mattered: silicon photonics on CMOS lines, with partners such as GlobalFoundries and Intel Foundry, turned a physics idea into a chip the industry could actually buy.

The timing argument finally paid: as AI shifted to power-constrained data centers, Nvidia's own photonics push made co-packaged optics infrastructure-critical, and Ayar raised $500M to scale first.

A decade of patience on the right interface bet pays when the bottleneck arrives: Ayar's co-packaged optics were ready exactly when AI hit copper's power wall — so the chip giants funded them.

As of 2026-03-03 Ayar was scaling rather than exiting: the $500M Series E led by Neuberger Berman valued it at $3.75B, total funding $870M, earmarked for high-volume production, test capacity, a new Hsinchu office and a doubled San Jose HQ. Ayar claims four to 20 times the compute throughput per watt of copper alternatives. Open questions remain: silicon photonics has overpromised before, high-volume manufacturing is unproven, and rivals (Celestial AI, Lightmatter, Lumentum, Coherent) chase the same sockets — shipping in volume first decides the payoff.