The archive · Hardware & Devices · Technical decision · 2015–2026
Ayar Labs' light-in-the-package bet: first UCIe optical chiplet, $870M raised
A decade-long bet that AI chips would need light inside the package, not copper between boxes, made Ayar Labs the first UCIe optical-chiplet supplier.
Ayar Labs
What the business is
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.
How it started
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.
What happened
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.
No ending yet — it is still running.
Background
Ayar Labs was founded in 2015 in San Jose out of a DARPA-funded photonics research collaboration among MIT, UC Berkeley and the University of Colorado Boulder. Its bet was architectural: instead of moving data between machines with pluggable optical transceivers, put optical I/O inside the chip package next to the compute die, using silicon photonics made on standard CMOS processes. Co-founder Mark Wade, who became CEO in December 2023, said the company saw the potential of co-packaged optics early — but for years the market for that idea was defense and aerospace, not data centers.
The AI boom turned the bet into a business. As GPU clusters grew, copper interconnects became a power and bandwidth bottleneck, and in-package optics became strategic. 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 it unveiled the first UCIe optical interconnect chiplet — an 8 Tbps TeraPHY chiplet with a 16-wavelength SuperNova light source — so accelerators from different vendors can interoperate over light.
By March 2026 the company was raising at scale: a $500 million Series E led by Neuberger Berman at a $3.75 billion valuation, with ARK Invest, the Qatar Investment Authority and 1789 Capital among new investors, bringing total funding to $870 million. Reuters reported the money would go to production and test capacity, global expansion including a new Hsinchu, Taiwan office, and faster deployment of co-packaged optics; Dealroom reported Ayar claimed four to 20 times the compute throughput per watt of copper alternatives and was entering high-volume manufacturing.
The company has not exited, and the race is not over: rivals include Celestial AI, Lightmatter, Lumentum and Coherent, and NVIDIA has spread its own photonics investments across several suppliers. But the founding bet — that AI would need light inside the package, and that the first supplier on an open standard would set the terms — had turned a university photonics project into a $3.75 billion company whose customers and investors include the very chipmakers it aimed to serve.
What has to be true
- 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.
What can be applied
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.
Aftermath
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.
Sources
- Chip giants again back Ayar Labs for optical interconnects
- Ayar Labs Unveils World's First UCIe Optical Chiplet for AI Scale-Up Architectures
- OFC 2025: Ayar Labs first UCIe with optical chiplet for AI scale-up architectures
- Nvidia-backed Ayar Labs raises $500 million at $3.75 billion valuation
- Ayar Labs raises $500M to replace copper with light in AI chips
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