US-headquartered semiconductor company Ayar Labs has closed a Series E funding round worth $500m, led by Neuberger Berman.

The Silicon Valley-based company aims to use the new capital to increase large-scale production and testing capacity for its co-packaged optics (CPO) solution.

With this latest investment, Ayar Labs’ total funding now reaches $870m and sets its valuation at $3.75bn.

The Series E round brought together several new and existing investors from both financial and strategic backgrounds.

New participants include Alchip Technologies, ARK Invest, Insight Partners, MediaTek, Qatar Investment Authority, Sequoia Global Equities, and 1789 Capital.

They join previous investors such as Advent Global Opportunities, Boardman Bay Capital Management, IAG Capital Partners, Light Street Capital, Playground Global, AMD Ventures, and NVIDIA.

Neuberger Berman will take on a board observer position at Ayar Labs as part of the investment.

The involvement of MediaTek and Alchip Technologies is expected to enhance collaboration with partners in the custom ASIC design sector.

Ayar Labs CEO and co-founder Mark Wade said: “AI infrastructure is hitting a power wall driven by interconnect inefficiency.

“As bandwidth demands explode, copper becomes the bottleneck — consuming too much power and limiting AI throughput per watt and per dollar. Co-packaged optics overcomes these barriers, enabling thousands of GPUs to operate as a unified system. This funding fuels our ability to meet the demands of hyperscale AI.”

Ayar Labs plans to direct the funding toward increasing manufacturing volumes and testing capabilities for its CPO products.

In addition to ramping up production, the company will expand its global presence, including at its recently opened office in Hsinchu, Taiwan.

Strengthening industry partnerships remains a key focus as Ayar Labs moves forward with broader deployment of its CPO technology.

The company’s CPO solution is designed to improve data transfer within AI infrastructure by substituting copper interconnects with optical connectivity to boost performance and efficiency for next-generation systems.

The TeraPHY optical engine underpins the platform and is compatible with standard industry manufacturing and packaging processes used by primary accelerator and switch suppliers.

Neuberger Berman managing director Gabe Cahill said: “With a production-ready scale-up co-packaged optics solution and deep ecosystem integration, we are excited to lead this round and help accelerate the paradigm shift taking place in AI infrastructure.”