Redwood Materials Secures $350M to Power AI Boom with U.S.-Made Grid Batteries

Major Funding Round Fuels Domestic Battery Production

Redwood Materials, the Nevada-based battery recycling and materials company founded by Tesla cofounder JB Straubel, has secured $350 million in new funding to significantly expand its grid-scale energy storage business. The investment round was led by venture firm Eclipse with participation from Nvidia’s investment arm, bringing Redwood’s total funding to $2.2 billion since its 2017 launch.

Major Funding Round Fuels Domestic Battery Production
Strategic Expansion Amid Surging Energy Demands
Building a Domestic Battery Supply Chain
Market Dynamics and Competitive Landscape
Technology and Safety Advantages
Broader Industry Implications

While the company didn’t officially confirm its valuation, sources familiar with the matter indicate it now exceeds $6 billion. This substantial financial backing comes at a critical moment when electricity demand from AI data centers and renewable energy integration is creating unprecedented need for large-scale energy storage solutions.

Strategic Expansion Amid Surging Energy Demands

The new capital will accelerate Redwood’s manufacturing capacity for energy storage systems and boost production of critical battery materials. According to the company statement, funds will be directed toward “expanding our energy storage deployments, refining and materials production capacity,” while also growing engineering and operations teams.

Joe Fath, partner and head of growth at Eclipse, emphasized the company‘s unique positioning: “One of the things we focus on is manufacturing at scale and we help companies with that. They have folks on the team that did this at Tesla, at Rivian, at other big-scale places. That team is very capable and efficient.”

Building a Domestic Battery Supply Chain

Redwood’s mission from its inception has been to establish a robust U.S. supply chain for battery materials, reducing dependence on Chinese refining dominance. The company began by recovering valuable elements including cobalt, nickel, copper and lithium from used batteries, then progressed to manufacturing cathode materials for new cells.

The company‘s recent partnership with General Motors represents a significant strategic move, securing lithium-iron phosphate (LFP) battery cells for large-scale energy storage systems. This positions Redwood to serve the rapidly growing demand from utilities and AI data center operators seeking reliable, domestically-produced energy storage solutions.

Market Dynamics and Competitive Landscape

The timing of this funding round aligns with several converging market trends. Electricity prices have surged at more than double the overall inflation rate, creating strong economic incentives for energy storage. Meanwhile, power-hungry AI data centers are driving unprecedented electricity demand, a trend that Nvidia – as the leading supplier of AI chips – is particularly aware of.

Redwood isn’t alone in recognizing this opportunity. Tesla recently reported that its Megapack battery storage systems saw a 44% value increase to $3.5 billion in the third quarter, highlighting the sector’s rapid growth. However, Redwood distinguishes itself through its integrated approach, combining recycling operations with new materials production and energy storage system manufacturing.

Technology and Safety Advantages

Redwood’s focus on LFP battery technology for grid-scale applications addresses both economic and safety concerns. LFP cells, while less energy-dense than some lithium-ion variants used in electric vehicles, offer significant advantages for stationary storage:

Lower cost compared to high-energy-density alternatives
Enhanced safety with reduced risk of overheating and fire
Longer lifespan ideal for grid applications
Reduced reliance on scarce materials like cobalt

The company stated it’s “creating a new generation of U.S.-made energy storage systems – scalable, low-cost, and designed to power data centers, industry, and the grid,” though specific pricing and technical details remain undisclosed.

Broader Industry Implications

This substantial investment in domestic battery production capacity comes amid fluctuating federal support for clean energy initiatives. While some EV incentives have been scaled back, there remains strong administrative support for expanding domestic production and refining of critical battery materials., as earlier coverage

The Biden administration has taken equity stakes in Nevada-based mining operations, including a major lithium mine and the only U.S. rare earth minerals mine, signaling commitment to building a complete domestic supply chain. Redwood’s expansion represents a crucial link in this chain, transforming raw materials into finished energy storage products that support both renewable energy integration and the power-intensive AI economy.

As Fath noted, “The opportunity’s pretty immense across the board,” reflecting investor confidence that Redwood’s unique combination of recycling expertise, materials science, and manufacturing scale positions it to capitalize on multiple growing market segments simultaneously.