As AI data centers hit power limits, Peak XV backs Indian startup C2i to fix the bottleneck

As the demand for AI data centers continues to surge, power consumption is rapidly becoming the key limitation in their expansion. In response to this pressing issue, Peak XV Partners has decided to invest in C2i Semiconductors, an innovative startup from India focused on developing advanced, plug-and-play power solutions. These solutions aim to minimize energy loss and enhance the cost-effectiveness of large-scale AI infrastructures. C2i, which stands for control conversion and intelligence, recently secured $15 million in a Series A funding round led by Peak XV Partners, with additional participation from Yali Deeptech and TDK Ventures. This latest investment brings the total funding for the two-year-old startup to $19 million. The urgency of this funding comes as global energy demands from data centers are projected to almost triple by 2035, according to a report from BloombergNEF. Furthermore, Goldman Sachs Research anticipates a staggering 175% increase in power demand from data centers by 2030 compared to 2023 levels — akin to adding another leading power-consuming nation. A significant portion of the challenges faced by data centers does not stem from power generation, but rather from the inefficiencies involved in converting that power. High-voltage electricity must be reduced thousands of times before reaching GPUs, leading to energy wastage estimated at 15% to 20%, as noted by C2i's co-founder and CTO, Preetam Tadeparthy. He emphasized this point in a recent interview, stating, "What used to be 400 volts has already moved to 800 volts, and will likely go higher." Founded in 2024 by a team of former Texas Instruments executives, including Ram Anant, Vikram Gakhar, Preetam Tadeparthy, and Dattatreya Suryanarayana, C2i is redefining the approach to power delivery by creating an integrated “grid-to-GPU” system that covers everything from the data center bus to the processor itself. By combining power conversion, control, and packaging into a single platform, C2i aims to reduce end-to-end losses by approximately 10%, which translates to a potential saving of 100 kilowatts for every megawatt consumed. This reduction in energy loss has significant implications for cooling costs, GPU efficiency, and the overall economics of data centers. Tadeparthy pointed out that these improvements can lead directly to reduced total ownership costs, increased revenue, and enhanced profitability. For Peak XV Partners, which separated from Sequoia Capital in 2023, the investment is strategically aligned with the growing impact of energy costs on AI infrastructure economics at scale. Managing director Rajan Anandan explained that after the initial investment in facilities and servers, energy becomes the dominant ongoing expense for data centers. He highlighted the value of even marginal efficiency gains, stating, "If you can reduce energy costs by, say, 10 to 30%, that represents a massive financial advantage — potentially tens of billions of dollars." The effectiveness of C2i’s solutions will soon be put to the test, as the company anticipates the return of its first two silicon designs from fabrication between April and June. Following this, they plan to validate their performance with data center operators and hyperscalers eager to assess the results. Based in Bengaluru, C2i has assembled a team of around 65 engineers and is expanding its customer-facing operations in the U.S. and Taiwan as it prepares for initial deployments. The redesign of power delivery is a challenging area, traditionally dominated by established players with extensive resources and lengthy qualification processes. While many startups focus on enhancing individual components, C2i’s approach involves a comprehensive redesign of the entire power delivery system — a capital-intensive strategy that requires synchronizing silicon, packaging, and system architecture. Anandan pointed out that the key to C2i’s success will be its execution. All startups face various risks, including technology, market conditions, and team capabilities. However, he believes that C2i's feedback loop will be relatively short, allowing them to gauge their progress quickly. "We’ll know in the next six months," Anandan stated, emphasizing the importance of the upcoming silicon and early customer validation in testing their business thesis. This investment also underscores the maturation of India's semiconductor design ecosystem. Anandan likened the current state of semiconductors in India to the early days of e-commerce in 2008, suggesting that the sector is just beginning to evolve. He noted the country's growing pool of engineering talent, combined with government incentives supporting semiconductor design, which are lowering the costs and risks involved in developing globally competitive products. As C2i embarks on this journey, the coming months will be critical in determining whether its innovations can lead to a competitive edge in the semiconductor landscape.