CScale raises $145 million for AI networking, with backing from Nvidia and Intel

By Stephen Nellis

SAN FRANCISCO, Sept 30 (Reuters) - CScale, a Silicon Valley startup developing a way to connect AI chips with fiber-optic cables instead of fiber, said on Wednesday it has raised $145 million in venture capital, with backing from Nvidia NVDA.O and Intel INTC.O.

The company, which formerly went by the name CSpeed and has given few details about its technology, is being led by CEO Martin Lund, who left his post overseeing chip and hardware systems for networking giant Cisco Systems CSCO.O earlier this year.

With the funding, CScale is joining a scramble in Silicon Valley to replace the copper cables that wire together the chips inside AI data center servers with optical cables.

Copper cables are fast and reliable, but have limited reach. Those reach limits have forced chip designers such as Nvidia and Advanced Micro Devices AMD.O to pack their processors tightly together inside servers, which in turn requires elaborate liquid cooling systems because of the heat generated by the chips.

Public companies and startups alike are pouring billions of dollars into replacing those connections with optical connections that use flashes of laser light instead of electrons to carry data. But those lasers are prone to frequent failures, and so many of the firms chasing technology keep the laser separate from the chip so that it can be replaced.

In an interview, Lund declined to give specifics of CScale's technology except to say that the company will integrate lasers onto the chips in a way that does not interrupt the flow of data when the lasers fail.

"We're not using any exotic technologies," Lund said. "We're using proven technologies, integrating them together in a novel way, but preserving the same trusted fiber technology that has been out there and shipping in the industry for many, many years now."

Lund said CScale, which has raised $188 million to date, plans to ship its chips by 2028.

Leading the financing round were Atreides Management, Valor Equity Partners and Premji Invest. Existing investors Sutter Hill Ventures and Maverick Silicon also took part in the funding announced on Wednesday.