Artificial intelligence startups pulled in $192.7 billion from venture capitalists this year, accounting for 52.5% of the $366.8 billion in total VC funding, according to data provider PitchBook. The shift marks 2025 as the first year on record where AI claimed more than half of all venture dollars.
U.S. investors drove the concentration, allocating 62.7% of their capital to AI companies in the most recent quarter. Global investors followed at 53.2%. The money flowed primarily to established names: Anthropic raised $13 billion in September, while Elon Musk’s xAI secured billions in its own funding round.
The capital rush left other startups in the cold. Seed funding dropped 14% to $7.2 billion, while early-stage investment fell to $24 billion. The total number of deals reached 7,551 globally, but fewer startups successfully closed rounds compared to previous years. PitchBook recorded 823 new venture funds raised worldwide in 2025, down from 4,430 in 2022.
“The market is becoming bifurcated,” Kyle Sanford, PitchBook’s director of research, told Bloomberg. “You’re in AI, or you’re not. You’re a big firm, or you’re not.”
Some executives at the Milken Institute Asia Summit in Singapore warned the valuations had detached from fundamentals. “There’s a little bit of a hype bubble going on in the early-stage venture space,” said Bryan Yeo, group chief investment officer at Singapore sovereign wealth fund GIC. “Any company startup with an AI label will be valued right up there at huge multiples of whatever the small revenue.”
Todd Sisitsky, president of alternative asset manager TPG, noted that early-stage AI ventures commanded valuations between $400 million and $1.2 billion per employee. Some firms hit $100 million in revenue within months of launching, he said, calling the pace “breathtaking.” He added that investor opinions split on whether the sector had formed a bubble, with fear of missing out driving some decisions.
The funding surge extended a multiyear trend. In the first quarter alone, AI startups raised $73.1 billion globally, representing 57.9% of all venture capital, according to PitchBook. OpenAI’s funding activity contributed to the quarter’s momentum, though specific round details vary by source.
Yeo at GIC questioned whether the technology could deliver on market expectations. “Market expectations could be way ahead of what the technology could deliver,” he said. “We’re seeing a major AI capex boom today. It is masking some of the potential weaknesses that might be going on in the economy.”
The concentration of capital in AI left non-AI companies facing a difficult fundraising environment. The hangover from a tight market for public listings and acquisitions made venture investors reluctant to bet on unproven companies, PitchBook found. Startups without AI components struggled to attract attention from investors recalibrating their portfolios around the technology.
The shift in venture capital allocation came as tech giants took on debt to fund their own AI ambitions. Microsoft, Google, and Oracle raised $170 billion in debt offerings this year to support data center construction and chip purchases. The spending wave drove up electricity costs in regions hosting new AI infrastructure, with some areas reporting price increases exceeding historical norms.
Despite concerns about valuations, defenders of AI investment pointed to rapid revenue growth and genuine technological advances. The number of AI companies generating significant revenue within their first year of operation exceeded historical patterns for other technology sectors. Proponents argued the capital supported real product development rather than speculative ventures.