AI Data Centers Face Critical Power Crisis: How Peak XV’s $15M Bet on C2i Could Solve the Bottleneck

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AI Data Centers Face Critical Power Crisis: How Peak XV’s $15M Bet on C2i Could Solve the Bottleneck

BENGALURU, India – October 2025. As artificial intelligence models grow exponentially in size and complexity, a surprising bottleneck now threatens their expansion: electricity. Power, rather than raw computing capability, has emerged as the primary constraint for scaling AI data centers globally. This fundamental shift in infrastructure economics has prompted major investors to seek innovative solutions, leading Peak XV Partners to lead a $15 million Series A investment in Indian startup C2i Semiconductors, which aims to redesign power delivery from the grid directly to the processor.

The AI Data Center Power Bottleneck Explained

Global electricity consumption from data centers is projected to nearly triple by 2035, according to a December 2025 BloombergNEF report. Meanwhile, Goldman Sachs Research estimates data-center power demand could surge 175% by 2030 from 2023 levels. This staggering increase represents the equivalent of adding another top-10 power-consuming country to the global grid. The strain comes not merely from generating more electricity but from converting it efficiently within data center walls.

High-voltage power entering a facility must be stepped down thousands of times before reaching the graphics processing units (GPUs) that drive AI computations. This conversion process currently wastes approximately 15% to 20% of all energy, according to C2i’s co-founder and CTO Preetam Tadeparthy. “What used to be 400 volts has already moved to 800 volts, and will likely go higher,” Tadeparthy explained in an exclusive interview. Each percentage point of loss translates directly into billions of dollars in operational costs and reduced computational capacity.

The Economic Impact of Power Inefficiency

Rajan Anandan, Managing Director at Peak XV Partners, highlighted the financial implications. After the upfront capital investment in servers and facilities, energy costs become the dominant ongoing expense for data centers. “If you can reduce energy costs by, call it, 10 to 30%, that’s like a huge number,” Anandan stated. “You’re talking about tens of billions of dollars.” This economic reality makes even incremental efficiency gains extraordinarily valuable for hyperscalers and data center operators.

C2i Semiconductors’ Grid-to-GPU Solution

Founded in 2024 by former Texas Instruments power executives, C2i (which stands for control, conversion, and intelligence) takes a fundamentally different approach to power delivery. Instead of optimizing individual components, the startup designs plug-and-play, system-level solutions spanning from the data-center bus to the processor itself. The company treats power conversion, control, and packaging as an integrated platform rather than separate engineering challenges.

C2i estimates its approach can cut end-to-end power losses by approximately 10%, saving roughly 100 kilowatts for every megawatt consumed. These savings create significant knock-on effects:

• Reduced cooling costs: Less wasted energy means less heat generation
• Improved GPU utilization: More power reaches the actual computation units
• Enhanced data-center economics: Lower operational expenses and higher profitability
• Smaller carbon footprint: Reduced energy consumption benefits sustainability goals

Investment and Validation Timeline

The $15 million Series A round, which brings C2i’s total funding to $19 million, included participation from Yali Deeptech and TDK Ventures alongside lead investor Peak XV Partners. The capital will support the startup’s ambitious validation timeline. C2i expects its first two silicon designs to return from fabrication between April and June 2026, after which the company plans to validate performance with data-center operators and hyperscalers that have already requested to review the data.

The Bengaluru-based startup has assembled a team of approximately 65 engineers and is establishing customer-facing operations in both the United States and Taiwan as it prepares for early deployments. This global approach reflects the international nature of the semiconductor and data center industries while leveraging India’s growing engineering talent pool.

The Execution Challenge in Power Infrastructure

Power delivery represents one of the most entrenched segments of the data-center technology stack, long dominated by large incumbents with deep balance sheets and years-long qualification cycles. While many newer companies focus on improving individual components, redesigning power delivery end-to-end requires coordinating silicon, packaging, and system architecture simultaneously. This capital-intensive approach demands substantial investment and patience, as proving such systems in production environments typically takes years.

Anandan acknowledged these challenges while expressing confidence in C2i’s approach. “The real question now is execution,” he noted, pointing out that all startups face technology, market, and team risks when betting on how industries evolve. “We’ll know in the next six months,” Anandan added, referring to the upcoming silicon validation and early customer feedback as critical milestones for testing the company’s thesis.

India’s Emerging Semiconductor Ecosystem

The investment in C2i reflects broader maturation within India’s semiconductor design ecosystem. “The way you should look at semiconductors in India is, this is like 2008 e-commerce,” Anandan observed. “It’s just getting started.” He pointed to several factors driving this development:

These conditions have made it increasingly viable for startups to build globally competitive semiconductor products from India rather than operating solely as captive design centers for multinational corporations. The government-backed design-linked incentives have particularly helped lower the financial barriers to silicon tape-outs, reducing both cost and risk for innovative companies.

Industry Context and Competitive Landscape

The power conversion challenge in data centers has gained attention across the technology industry. Traditional power supply manufacturers continue to innovate incrementally, while several startups have emerged with component-level improvements. However, C2i’s system-level approach remains relatively rare due to the significant engineering complexity and capital requirements involved.

Meanwhile, data center operators face mounting pressure from multiple directions:

• Regulatory requirements: Increasing focus on energy efficiency and carbon emissions
• Economic pressures: Rising electricity costs in many regions
• Technical demands: Higher power requirements for next-generation AI chips
• Geographic constraints: Limited power availability in preferred data center locations

These converging factors create both urgency and opportunity for innovative power solutions. Successful technologies could reshape not only data center economics but also the geographic distribution of AI infrastructure, potentially enabling more sustainable and cost-effective deployment models.

Conclusion

The AI data center power bottleneck represents a critical challenge for the continued advancement of artificial intelligence. As computational demands escalate, efficient power delivery has become essential rather than optional. C2i Semiconductors’ system-level approach, backed by Peak XV Partners’ significant investment, offers a potential pathway through this constraint. The coming months will prove crucial as the startup validates its silicon designs with hyperscalers and data center operators. Success could transform both the economics of AI infrastructure and India’s position in the global semiconductor landscape, demonstrating that innovative solutions to fundamental technological challenges can emerge from unexpected places. The entire industry now watches as C2i attempts to turn its grid-to-GPU vision into operational reality.

FAQs

Q1: What is the main power challenge facing AI data centers?
The primary challenge is inefficient power conversion within data centers, where 15-20% of electricity is lost as high-voltage power is stepped down thousands of times before reaching AI processors. This waste creates enormous economic and operational constraints.

Q2: How does C2i Semiconductors’ approach differ from traditional solutions?
Unlike traditional component-level optimizations, C2i designs integrated, system-level power solutions that span from the data-center bus to the processor itself. This “grid-to-GPU” approach treats power conversion, control, and packaging as a unified platform rather than separate problems.

Q3: What potential impact could C2i’s technology have on data center operations?
The company estimates its system could reduce end-to-end power losses by approximately 10%, saving about 100 kilowatts per megawatt consumed. This efficiency gain would lower cooling costs, improve GPU utilization, and significantly reduce total cost of ownership for data center operators.

Q4: Why is Peak XV Partners investing in power infrastructure for AI data centers?
After initial capital investments, energy costs become the dominant ongoing expense for data centers. Even modest efficiency improvements can translate to billions of dollars in savings across the industry, making power optimization a high-value investment opportunity as AI scales globally.

Q5: What does C2i’s development timeline look like?
The company expects its first two silicon designs to return from fabrication between April and June 2026, followed by validation with data-center operators and hyperscalers. The Bengaluru-based startup has built a team of 65 engineers and is establishing operations in the U.S. and Taiwan to support early deployments.

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