For venture capital, 2025 was all about artificial intelligence – a trend that will almost certainly continue into 2026.
More than half of all venture capital dollars – and 36% of total deals – now flow to AI companies, according to a recent study.The Silicon Valley Bank report. Crunch baserecently reportedthat 14% of all global venture capital investments in 2025 went to AI giants OpenAI and Anthropic. The year also saw major deals, such as a $2 billion seed round from Thinking Machines Lab, the AI startup founded by former OpenAI CTO Mira Murati.
AI deals also tend to close quickly, with investment rounds that previously would have taken weeks being completed within a few days, says Tim Tully, a partner at Menlo Ventures. “You see people making big rounds without card games, which is quite shocking, or even absolute clarity about what exactly the company is going to do,” he says. “You see the funding of teams over what the team does.”
But even amid speculation that the industry could be in a bubble — and there are signs of public fatigue over the technology that has crept into everything from therapy sessions to children’s toys — investors and industry observers say the AI push will continue into 2026.
TAM explosion
In some ways, AI is mimicking the wave of investment around other recent transformative technologies, such as the rise of the PC, the Internet and mobile phone. “New technologies are coming and they’re transformative, and that’s driving a lot of investment,” said Steven Neil Kaplan, a professor at the University of Chicago who researches venture capital. “Some of them succeed, some don’t, and hopefully the world will become more productive.”
But Michael Carmen, co-head of private investments at Wellington Management and co-author ofa venture capital outlook report The company, which launched in December, says AI companies have recently been growing revenue at a historically fast pace – faster than previous generations of Software-as-a-Service (SaaS) companies. Widespread internet use has essentially given new AI products immediate access to a huge potential market, Carmen adds, noting: “If you think about the [total addressable market] of AI in the longer term, it could be the biggest TAM of anything we’ve ever seen in technology.”
AI is increasingly competing with traditional SaaS companies for both customers and investors, says Saagar Bhavsar, partner at Begin Capital. For starters, artificial intelligence is making companies wonder whether it’s more feasible to build software tools in-house using new coding assistants and other AI agents.
“If the cost of building the software and the time of building the software become close to zero, the whole idea of SaaS disappears,” said Sergey Gribov, general partner at Flint Capital.
Even without AI, some companies have begun to rethink the vast array of cloud services they’ve signed up for over the years, including deals they signed during the chaos of the pandemic shutdowns, Bhavsar says. And investors are taking notice. “Few people call themselves B2B SaaS investors anymore, even though historically they did,” he says.
Bhavsar says venture capital firms and their investors are showing increasing interest in new types of opportunities, including investments in computer hardware, data centers, physical computing and robotics. There is also increasing interest in so-called AI rollups, popularized by VCs such as General Catalystwhere venture capital-backed companies buy service businesses such as IT companies, call centers or accounting firms with the aim of making them more efficient through AI adoption. Historically it has looked more like private equity investing, but the technological link has made it attractive to the venture capital world.
“The most interesting thing right now is that any type of deal can be a VC deal,” says Bhavsar. “Any field can be a VC field if they do it right.”
AI models running on powerful graphics processing units, like the ones that have skyrocketed chipmaker Nvidia’s market value, could become the basis for a wide range of applications. (It’s similar to the wave of software developed on top of Microsoft Windows and Intel chips in the PC era, Carmen suggests.) VCs want to invest in companies building these AI-powered apps, though they’re also still excited about the frontier labs developing the models and core technology that help AI process text, images, video, and sound. After all, that market still sees fierce competition between companies like OpenAI, Anthropic and Google, and new startup labs are emerging like Murati’s Thinking Machines or Tokyo-based Sakana AI.
“I think there’s going to be a lot more of these people coming from the bigger names, or researchers from academia who want to start these research labs,” said Christine Tsai, founder and CEO of 500 Global.
There is also room – and VC appetite – for new, innovative AI models for areas other than language and image processing, such as autonomous vehicles and robotics. “We believe there will be a company that will build the robot brain, if you will, that will power many different apps and many different use cases,” said Janelle Teng, partner at Bessemer Venture Partners.
Fintech, defense technology and the rest
Still, AI has not yet completely conquered the VC sector. Other areas of investor interest include fintech, especially after the 2025 IPOs of companies like Klarna, Circle and Chime, as well as aerospace and defense technology, Teng says.
Space and defense startups are also benefiting from the Trump administration’s efforts review of military procurement and move business away from major defense companies, while fintech startups can benefit from the government’s deregulatory approach to financing.
VCs who would not have invested in defense technology in the past are also encouraged by Anduril’s success, according to Carmen, who notes that another area of excitement for VCs is health technology, including wearable technology and other tools that help provide consumers with information to manage their health.
An open question for VCs and other early-stage investors is whether the IPOs and acquisitions that characterized 2025 will continue into the new year. “There was a lot more activity and liquidity in the markets, and we saw that in our own portfolio, unlike in previous years when it was extremely dry and it felt like things were still frozen,” Tsai said.
A number of major startups are reportedly preparing for initial public offerings AI companies OpenAI and Anthropic And Elon Musk’s SpaceX. Their success could lead to more initial offers. These transactions provide early-stage investors with money for the next round of investment, but as major companies remain private longer than during previous technological developments, there are often other ways to sell shares through public tenders and other private deals. And if recent activity is any indication, there’s no shortage of investor money pursuing stakes in startups, especially in the AI space.
Only time will tell which of these investments will prove wise, and whether the ever-escalating valuations of so many AI companies will hold up. “The hard thing to know is: are we in 1997 or are we in 1999,” says Kaplan. “VC investments in ’97 did very well. VC investments in ’99 did terribly.”
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