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Celestial AI Secures $250 Million to Enhance AI Chip Connectivity

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Silicon Valley-based startup Celestial AI has raised an additional $250 million in venture capital, bringing its total funding to $515 million. The company aims to accelerate AI computing by leveraging photonics—a technology that uses light instead of electrical signals—to enhance the speed of data transfer between AI processing and memory chips.

Memory bandwidth, which determines the efficiency of AI systems, is a crucial factor in chip performance and a key consideration in U.S. government export controls aimed at limiting China’s AI capabilities. Currently, Nvidia dominates this space with its proprietary NVLink and NVSwitch technologies, prompting a surge in investments to develop alternative solutions. Celestial AI’s competitors, Lightmatter and Ayar Labs, have raised $850 million and $370 million, respectively, in similar efforts.

Celestial AI is backed by AMD Ventures, the investment arm of Nvidia’s competitor Advanced Micro Devices (AMD). The company is working on a “photonic fabric” that acts as a high-speed bridge between multiple chips. According to CEO Dave Lazovsky, the technology improves efficiency by reducing energy consumption and latency while saving valuable chip space.

“There are no good answers outside of Nvidia,” Lazovsky said in an interview at Celestial AI’s headquarters in Santa Clara, California. “What we’ve created with photonic fabric achieves similar functionality but with superior energy efficiency and lower latency.”

The funding round was led by Fidelity Management & Research and included BlackRock, Maverick Capital, Tiger Global Management, and former Cadence Design Systems CEO Lip-Bu Tan. Existing investors such as AMD Ventures, Koch Disruptive Technologies, Singapore’s state investor Temasek, and Porsche Automobil Holding also participated.

Marvell Shares Suffer Worst Day in 24 Years Amid Tepid AI Revenue Forecast

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Marvell Technology’s (MRVL.O) shares plunged by 19.8% on Thursday, marking their worst day in over two decades. The sharp decline follows a revenue forecast for the upcoming quarter that failed to meet investor expectations, reigniting concerns about cooling demand for AI infrastructure.

The stock closed at $72.28, reaching a four-month low of $71.65 earlier in the day. Investors had been looking to Marvell’s earnings, a key supplier of custom AI chips, for indications of sustained demand in the AI sector, which has driven significant market growth since the rise of ChatGPT in late 2022. However, Marvell’s forecast for the next quarter was only slightly above analyst expectations, falling short of the more substantial beat that investors were hoping for.

TD Cowen analyst Joshua Buchalter noted that investors were anticipating stronger revenue growth, given recent comments on capital expenditures from some of Marvell’s largest customers. With over 45 million shares traded, significantly more than the 50-day average of 14 million, the market responded nervously.

The decline in Marvell’s stock price also weighed on other chipmakers, including Broadcom, which saw its shares drop nearly 7%, and Nvidia, which slid by 5%. Marvell’s performance led to a $15 billion loss in market value, and its shares are down 18% this year after an 83% rise in 2024.

Marvell’s CEO, Matt Murphy, did highlight that the company had exceeded its fiscal 2025 AI revenue target and is optimistic about surpassing its projections for fiscal 2026. However, analysts attributed the weak forecast to a slowdown in demand for on-premise data center products, as Big Tech shifts spending towards AI chips, leaving Marvell’s core networking business, which focuses on ethernet cables and fiber channels, in a weaker position.

The semiconductor sector overall has faced pressure from tariffs imposed by the U.S. government, adding to investor concerns. Analysts from Melius Research noted that sentiment around AI semiconductor stocks is currently negative, and many brokerages have cut their price targets for Marvell following the results.

U.S. Labor Department Investigates Scale AI for Fair Labor Practices

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The U.S. Department of Labor is investigating Scale AI, a data labeling startup backed by major tech companies including Nvidia, Amazon, and Meta, for potential violations of the Fair Labor Standards Act. The investigation, which began nearly a year ago under the Biden administration, is focused on Scale AI’s compliance with fair pay practices and working conditions.

Scale AI, based in California, provides large volumes of accurately labeled data crucial for training AI tools such as OpenAI’s ChatGPT. The company also offers a platform for researchers to share AI-related information, with contributors from over 9,000 cities and towns.

A spokesperson for Scale AI emphasized that the company has worked closely with the Labor Department over the past year, explaining its business model and the emerging nature of the AI industry. The startup assured that feedback from its contributors has been largely positive, and it has dedicated teams to ensure fair compensation and support for workers. Nearly all payments to contributors are made on time, and the company resolves 90% of payment-related inquiries within three days.

Scale AI, which was founded in 2016, was valued at $14 billion in a recent funding round. Its client base includes AI firms like OpenAI and Cohere, as well as major corporations such as Microsoft and Morgan Stanley.