AI networking chip startup nEye Systems raises $58 million, led by Alphabet's CapitalG fund 

NEye Systems, a startup developing a new kind of networking chip for artificial intelligence data centers, on Thursday raised $58 million in venture financing in a round led by CapitalG, a growth-stage fund backed by Alphabet.

Emeryville, California-based nEye is developing a chip that taps optical technology to send information between AI chips in the form of light rather than electrical signals, a field that chip giants such as Nvidia and startups alike are chasing because it could lower energy use for AI data centers.

But energy efficiency is only part of nEye's goal. The startup is focusing on a type of chip called an optical circuit switch, which allows the owner of a data center to change how its computers are connected on the fly.

That can help improve the data center's performance by selecting the best way to string computers together based on whatever software it happens to be running. Alphabet's Google used such chips several years ago to construct an AI supercomputer that it claimed beat Nvidia's then-current offerings, but its chips were proprietary and not available to the wider market.

NEye is now taking that concept and developing a chip for the rest of the market.

"Google is a pioneer. They led the way," said Ming Wu, one of the firm's co-founders and also a professor at University of California Berkeley. "Other AI companies, other hyperscaler AI data center operators, they will be looking to acquire some of this technology rather than developing it themselves."

Neye has made prototype chips and expects to have samples of production chips next year but has not disclosed when it expects to ship in large volumes.

James Luo, the general partner at CapitalG who led the investment, said that even if the current AI data center boom does not last, the nEye chip's advantages in energy efficiency and flexibility also apply to more traditional data centers.

"The beauty of it is as applicable to both models," Lou said.

NEye has raised $72.5 million to date, and its other investors include M12, Microsoft’s venture fund, Micron Technology, and Nvidia, among others.