Optalysys has raised £23m in a Series A extension round as it seeks to scale production of its photonic chips and expand into the US market, amid growing concern that conventional electronic computing is approaching its physical limits.

The funding was led by Northern Gritstone, with participation from imec.xpand, Lingotto Horizon and the UK government’s National Security Strategic Investment Fund.

Optalysys is developing processors that use light rather than electrons to move and process data, combining silicon photonics with digital technologies. The company argues that this approach can deliver significantly higher performance while reducing the energy consumption associated with today’s data centres and AI workloads.

Rising demand for artificial intelligence and cloud services is placing increasing strain on traditional semiconductor architectures. As chipmakers struggle with power density and heat dissipation, interest in alternative computing paradigms — including photonics — has grown among investors and large technology groups.

Optalysys’s technology integrates data transfer and computation on a single chip, creating what it describes as a programmable, high-density layer for compute-intensive applications such as generative AI and post-quantum cryptography. A key focus is fully homomorphic encryption, which allows data to be processed while remaining encrypted — a capability seen as critical for secure cloud and enterprise systems.

Early versions of this technology are already deployed in the company’s LightLocker Node servers, launched last year for encrypted blockchain applications and billed as the first dedicated hardware solution of their kind.

Nick New, chief executive and co-founder of Optalysys, said photonic computing represented a step-change in how information could be handled. “It allows data to be moved and processed with far greater speed and efficiency,” he said, adding that the investment would support international growth and wider commercial adoption.

Robert Todd, chief technology officer and co-founder, pointed to recent semiconductor acquisitions as evidence of rising interest in photonics. He said expansion into the US would allow the company to tap into Silicon Valley’s talent base and established photonics ecosystem.

Duncan Johnson, chief executive of Northern Gritstone, said Optalysys had demonstrated both technical and commercial momentum. He described the business as well positioned to deliver “real-world impact” as demand for more powerful and energy-efficient computing continues to grow.