Israeli chip company Xsight Labs raises $300 million at $2.8 billion valuation
The semiconductor startup is gaining traction with global network operators and hyperscalers as demand surges for chips that can connect the massive computing systems powering artificial intelligence.
Israeli semiconductor company Xsight Labs has reached a significant milestone: the company has raised more than $300 million at a valuation of $2.8 billion. The sharp increase in the company’s value, more than five times its previous valuation of $500 million in its 2021 funding round, comes after rapid commercial growth, including the selection of its networking chips by global network operators and growing traction among hyperscalers, service providers and OEMs.
The current funding round is led by Fidelity Management & Research Company, with participation from existing investors and new backers including Atreides Management, Artisan Partners, Battery Ventures, Intel Capital, T. Rowe Price, Valor Equity Partners and others. The company’s longtime investors include funds that have also backed other ventures associated with serial chip entrepreneur Avigdor Willenz, who serves as Xsight Labs’ founding investor and chairman of the board.
The main driver behind the dramatic fundraising is growing demand for advanced connectivity infrastructure needed to support artificial intelligence and cloud computing. Xsight Labs’ E1 Data Processing Unit (DPU) and X2 Ethernet switch have been selected by multiple global network operators for next-generation infrastructure, including SpaceX’s Starlink, while its technology is also being evaluated by Tier-1 hyperscalers.
Founded in 2017, Xsight Labs develops high-performance connectivity chips designed to solve one of the biggest challenges facing the AI industry: moving massive amounts of data efficiently between servers, memory systems and networks inside advanced data centers.
The company’s products include the E1 DPU, designed to process network traffic at extremely high speeds while reducing power consumption, and the X2 programmable Ethernet switch, which allows customers to modify network functionality through software rather than waiting for new generations of hardware.
The company’s main technological differentiator is its focus on open and programmable architectures. Unlike traditional networking solutions that rely on proprietary systems, Xsight Labs’ chips run standard software environments, including Linux and SONiC, allowing customers greater flexibility in adapting their infrastructure to changing workloads.
The company says its E1 chip can process 800 gigabits per second of network traffic while handling millions of connections per second, while the X2 switch delivers 12.8 terabits per second of programmable switching capacity. Both products are designed to address growing concerns around the energy consumption of AI infrastructure.
Xsight Labs was founded in 2017 by Guy Koren, Erez Sheizaf and Gal Malach, all former employees of EZchip, the Israeli network processor company acquired by Mellanox in 2016 for $811 million. The company develops chipsets for high-performance communications systems.
Since its founding, Xsight has raised more than $450 million across four funding rounds. Its first round was led by Willenz, followed by a second round led by Intel and Microsoft. A third round completed in 2020, which raised more than $50 million, was led by Intel.
The new funding marks a major step forward for Xsight Labs, which has spent recent years building its technology and expanding its commercial footprint. The company plans to use the capital to accelerate development of future generations of switches and DPUs, expand engineering and customer support teams across Israel, the US, Europe and Asia, and scale manufacturing and supply-chain operations to support larger customer deployments.
Willenz’s trajectory began in 1993 with the founding of Galileo Technology, which was later listed on Nasdaq and sold in 2001 to Marvell Technology for $2.7 billion, a landmark deal that helped usher in Israel’s era of large-scale tech exits.
In 2015, Willenz recorded another major success with the sale of Annapurna Labs to Amazon Web Services for approximately $370 million. What initially appeared to be a strategic but modest acquisition evolved into a cornerstone of Amazon’s infrastructure. Annapurna became central to AWS’s development operations in Israel, with its server chips now generating revenues estimated in the tens of billions of dollars.
Willenz’s ability to anticipate technological shifts has been a recurring theme. As an early investor and chairman of Habana Labs, he helped guide the company to its $2 billion sale to Intel in 2019. He was also behind the sale of Leaba Semiconductor to Cisco in 2016 for $320 million, and Banias Labs to Alphawave in 2022 for $240 million.
His influence extends beyond Israel. As an early investor in Astera Labs, Willenz participated in its March 2024 IPO at a valuation of $5.5 billion.
The latest addition to this track record came with the sale of DustPhotonics to Credo Technology Group in April. Under the terms of the deal, Credo will pay $750 million in cash and $123 million in shares, with an additional earnout of up to approximately $430 million. Willenz, who holds a roughly 6% stake in DustPhotonics, is expected to receive around $50 million from the transaction.
At the same time, Willenz continues to build new ventures. One of the more notable is Element Labs, founded alongside former Habana executives David Dahan and Ran Halutz. The company is developing AI processors focused on inference, the stage where trained models are deployed in real-world applications. Unlike Habana, which focused on large-scale training chips, Element Labs is targeting smaller, local data centers, aiming to reduce bandwidth and energy strain while improving response times. The company has raised $50 million to date.
