A Leeds-based technology start-up has raised £23 million to accelerate the commercial rollout of its light-powered computer chips, in a move that could strengthen the UK’s position in the global race to develop next-generation artificial intelligence hardware.
Optalysys will use the funding to scale its photonic computing technology and expand operations into the United States. The investment round was led by Northern Gritstone, with backing from the UK government’s National Security Strategic Investment Fund.
Optalysys develops chips that process and transmit data using light rather than electrical currents flowing through copper wires, a technology known as photonics. The approach dramatically reduces energy consumption, generates far less heat and allows data to be processed securely while remaining encrypted.
Unlike conventional semiconductor firms, Optalysys designs its chips in-house but outsources manufacturing to specialist foundries. These include facilities at University of Southampton, as well as partners in Belgium and Singapore, with a further site planned in New York state.
Nick New, founder and chief executive of Optalysys, said building fabrication plants internally would be prohibitively expensive and unrealistic given the dominance of players such as TSMC.
“Trying to compete head-on with traditional semiconductor giants would be futile,” said New. “But in photonics, where the next generation of processing will come from, the costs are far lower. That gives the UK a genuine opportunity to become a global leader in photonic computing.”
The company’s immediate commercial focus is secure computing. Because photons allow data to be processed while in motion and encrypted, sensitive information can be analysed by AI systems without being exposed, a capability New said is increasingly vital across finance, defence and critical infrastructure.
“In financial services, for example, transactions can be processed confidentially, which makes this technology suitable for mainstream banking in a way traditional AI systems are not,” he said.
Optalysys is currently pre-revenue but launched its first commercial secure-computing product last year and is beginning to ship it to customers in the coming weeks. New believes secure computing will underpin the next phase of AI and cloud infrastructure.
“Where companies like Nvidia provided the foundations for today’s AI boom, we can do the same for the next generation of AI and secure computing,” he said.
The company is also targeting AI data centres, where tens of thousands of graphics processing units generate intense heat and consume vast amounts of electricity. As AI models such as ChatGPT proliferate, the industry is increasingly constrained by power availability.
Light-based connections do not generate heat in the same way as electrical currents, significantly reducing cooling requirements and overall energy demand. New said this efficiency advantage could prove decisive as data centres become some of the world’s largest consumers of electricity.
“Any meaningful reduction in energy use at that scale saves enormous amounts of money and resources,” he said.
Optalysys currently employs just over 50 people across Leeds, Bristol and the US, and plans to hire a further 35 staff as it scales. The company is also establishing a commercial base in San Francisco to deepen its presence in the US market and tap into American investment networks.
With geopolitical concerns growing around chip supply chains and AI infrastructure, investors believe photonic computing could offer the UK a rare chance to carve out global leadership in a strategically vital technology.
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Leeds startup raises £23m to push UK to the forefront of the AI chip race