Israeli Startup Tackles AI’s Data Bottleneck With $50 Million Bet on Light

Israeli startup Teramount just raised $50 million to fix something most people don't even know is broken. While everyone obsesses over making AI chips faster, these Jerusalem-based physicists figured out the real problem: connecting those chips together without melting your data center.

The Series A round, led by Koch Disruptive Technologies, pulled in heavy hitters including AMD Ventures, Samsung Catalyst Fund, Hitachi Ventures, and Wistron. That's not your typical VC lineup - it's a who's who of companies that actually build the hardware running today's AI systems.

Teramount's solution tackles what CEO Hesham Taha calls "the perfect storm." As AI models grow more complex, they need thousands of processors working together. But those processors still talk to each other through copper wires - basically using 20th-century plumbing for 21st-century problems. The result? Massive power consumption and data bottlenecks that make your GPU cluster run like it's stuck in traffic.

The Unlikely Founding Story

Taha didn't follow the usual tech founder playbook. He's from Bu'eine Nujeidat, an Arab village in northern Israel. Fifth of eight kids. His father worked construction. His mother stayed home. Nobody in his family had gone to university.

After high school, Taha followed the village pattern and worked construction in central Israel - backbreaking work that meant long commutes each way. The 1990s construction boom paid well, and he could have stayed. "I made a lot of money there, and I asked myself: Why not actually continue? But physics attracted me," he recalls.

He chose Hebrew University in Jerusalem over the closer Technion because of its applied physics program. The studies were tough, made harder by language barriers and being the first in his family to attempt higher education. "I was the first of my brothers to go to study at university," he says. "But after that, I encouraged my three younger brothers to enroll and some of them have already completed their master's and doctoral degrees."

At Hebrew University, Taha met Avi Israel, his future co-founder. The two physicists became friends during undergrad and later worked together at Nanonics Imaging before launching Teramount in 2013.

Their Jerusalem office in Har Hotzvim now employs 40 people, with about 30% from Arab communities, including neighborhoods in East Jerusalem. "There's a different landscape here than the natural landscape of Israeli high-tech," Taha explains. The diversity wasn't planned - it just happened when you have founders who understand different communities.

The Light Speed Solution

Teramount's TeraVerse platform replaces copper connections between AI processors with optical fibers. The result: data moves 100 times faster while using 70% less power.

Using light instead of electricity isn't new - labs have done it for years. But making optical connections that work in real factories? That's different. It's making optical connections that actually work in real manufacturing environments. Their PhotonicPlug and PhotonicBump technologies let standard semiconductor factories build these connections without expensive manual fiber alignment.

"Almost all leading semiconductor companies in the world are actively working to promote this type of connectivity," Taha notes. The timing couldn't be better. The silicon photonics market hit $2.65 billion in 2025 and should reach $9.65 billion by 2030, driven largely by AI infrastructure demands.

Teramount already ships small volumes to customers and works with major foundries including Tower Semiconductor and GlobalFoundries. The company's connector design solves another practical problem - serviceability. Unlike permanently bonded fibers, their connectors can be detached and replaced, critical for large data centers.

What Happens Next

The funding will expand Teramount's team by 30% to 60 employees by year-end and scale production for the expected wave of Co-Packaged Optics adoption in 2027. CPO systems put optical components directly inside processor packages, eliminating the need to route signals outside the chip and back.

This isn't just about faster AI training - though that's certainly part of it. As AI moves from cloud data centers into edge computing, cars, and mobile devices, power efficiency becomes even more critical. You can't run ChatGPT on your phone if the optical connections alone drain the battery in minutes.

The investor lineup signals how seriously the industry takes this problem. AMD needs optical solutions for future processor architectures. Samsung and Hitachi have major silicon photonics investments. Koch Disruptive Technologies focuses on industrial-scale disruption, not consumer apps.

Isaac Sigron, KDT's managing director in Israel who joins Teramount's board, puts it simply: "Optical interconnects are critical components of the future of AI infrastructure, and Teramount is poised to be a leading supplier of these solutions."

The race is on to build the infrastructure for AI's next phase. While others argue about which chip architecture will win, Teramount is building the roads that connect them all.

Why this matters:

• AI's biggest bottleneck isn't compute power - it's moving data between processors fast enough without melting your power grid

• This Arab-Jewish founding team accidentally created one of Israeli tech's most diverse workplaces by simply hiring the best people they could find