Vertical Semiconductor Inc. is hoping to crack the power delivery bottleneck in artificial intelligence data centers after closing on an $11 million seed funding round today.

The round was led by Playground Global, and saw participation from Jimco Technology Ventures, Milemark-Capital and Shin-etsu. The startup, which likes to go by the name Vertical, was spun out of the Massachusetts Institute of Technology’s Palacios Group, which is a research laboratory that’s focused on developing gallium nitride transistors, as an alternative to silicon-based chips.

GaN transistors are highly efficient, have faster switching speeds and can operate at higher temperatures and voltages than traditional silicon transistors. That makes them useful for applications such as power electronics, electric cars and telecommunications.

While standard GaN transistors already exist, Vertical is flipping the concept on its head, designing GaN-based chips where the transistors are stacked vertically instead of laterally. By doing this, it’s possible to squeeze more transistors onto a chip and support even higher voltages. The design allows the electrical current to flow through more of the transistor, enhancing its performance.

Vertical GaN transistors support higher densities due to their superior thermal management. The vertical structure allows for better heat dissipation compared to lateral designs, and it also means they can handle power surges more efficiently, using a self-protection mechanism called “avalanche” that helps them to continue operating during a voltage spike.

Co-founder and Chief Executive Cynthia Liao believes that vertical GaN transistors are just what’s needed for AI data centers, which have come under strain due to bottlenecks in power delivery. Simply put, existing chip designs can’t draw enough power to sustain more advanced AI workloads, and that’s where the company wants to help.

“The pace of AI is not only limited by algorithms,” Liao said. “The most significant bottleneck in AI hardware is how fast we can deliver power to the silicon. “We’re not just improving efficiency, we’re enabling the next wave of innovation by rewriting how electricity is delivered in data centers at scale.”

Liao said the company’s vertical GaNs push energy conversion closer to the chip, enabling them to do more computations with less energy and heat. They can reduce energy loss and sudden shutdowns due to power surges, while enabling data centers to run much cooler. As a result, they can improve data center efficiency by up to 30% while reducing the power footprint by as much as half, she said.

Vertical has already demonstrated its technology on eight-inch wafers using standard complementary metal oxide semiconductor manufacturing methods, and says this proves that its technology can be integrated seamlessly into existing data centers.

Playground Global’s Matt Hershenson said Vertical has cracked a challenge that has befuddled the semiconductor industry for years. “[The challenge is] how to deliver high voltage and high-efficiency power electronics with a scalable, manufacturable solution?” he said. “Vertical is not just advancing the science, it’s changing the economics of compute.”

Vertical said it already has prototypes of its vertical GaN transistors in development, and the money from today’s round will help it to start sampling packaged devices for early customers by the end of the year. If all goes well, it will have a fully integrated solution available before the end of 2026.

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