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In brief
The growth in venture capitalist (VC) funding for generative AI (GenAI) investments continued to accelerate during the first half of 2025. According to the EY Ireland Generative AI Key Deals and Market Insights study1, total deal value reached a new record of $49.2 billion. This amount is higher than the total for all of 2024, which was also a record year with an 80% growth. The rapid growth is expected to continue into the second half of the year with the launch of new GenAI platforms and their faster revenue generation capabilities. Deal volume, however, fell by nearly 25% compared to the previous six months.
This growth is being driven by increased adoption of AI by businesses and consumers, a rise in demand for industry-specific AI solutions, and ongoing innovation in AI hardware, especially in semiconductors. The significant fall in training costs for foundation models has also contributed to the attractiveness of GenAI investments.
The reduction in the number of deals is a reflection of growing market maturity with average deal size increasing as the focus shifts to later stage GenAI investments. Average transaction size for these late-stage investments more than tripled to $1,553 million from $481 million in 2024. Meanwhile, early-stage VC rounds declined while angel and seed rounds saw no change.
Technology advances are playing a critical role. VCs are increasingly focusing on GenAI application businesses that build specialised software using third-party foundation models for consumer or enterprise use. The development of software, platforms and tools for specific uses cases to meet identified market needs is creating new paths to profitability and clearer returns on VC investment.
Newly launched platforms during 2025 include Acuvity’s RYNO2, the first of a kind GenAI security platform purpose-built to deliver context-aware protection and adaptive risk management across users, applications, and AI-powered agents.
The fall-off in earlier stage deal activity is another indication of market maturity. The more established pure play GenAI companies along with the legacy tech players have come to dominate the foundational GenAI space limiting the opportunity for new entrants and increasing risk for investors.
Another continuing theme in the market is the increase in corporate partnerships with companies such as Waymo and xAI as companies seeking new ways to get a slice of the AI action.
However, many organisations still struggle to articulate the value and benefit their AI investment and initiatives bring. The reasons for this can be diverse and are often rooted in reasons such as sluggish adoption. Lack of leadership buy-in, failed organisational change programmes and (in)ability to measure progress can all be contributors.
Grit Young
EY-Parthenon Partner and EY Ireland Technology, Media & Entertainment and Telecommunications Industry Leader
Agentic AI which enables systems to autonomously perceive, decide, and act in complex environments has emerged as another growth theme with increased activity in the space. The most notable deal in this area so far in 2025 has been Capgemini’s $3.3 billion acquisition of WNS3 while Berlin-based Parloa raised $120 million,4 propelling it to a $1 billion valuation.
Those deals are dwarfed by the SoftBank Group-led investment in OpenAI in March. The investors agreed to fund OpenAI with $10 billion in mid-April with an additional $30 billion to follow in December. The investment is, however, contingent on the AI firm transitioning to a for-profit model by the end of the year at a valuation of $300 billion.5
Other notable transactions in the first half of the year included xAI, valued at $80 billion in March, raising an additional $10 billion6 comprised of $5 billion in strategic equity investment and the same amount again in secured notes and term loans. Databricks raised $5 billion at a $62 billion valuation in January 2025,7 while Anthropic raised $3.5 billion at a $61.5 billion post-transaction valuation in March.8 SandboxAQ raised $450 million the following month.9 Mistral AI raised €600 million in June10 at a €6 billion valuation. Harvey raised $300 million at a $5 billion valuation, also in June.11
The level of concentration of deal activity in the US is staggering by any measure. Last year, the US accounted for nearly 70% of the deal count and 85% of value in the GenAI space. For the first half of 2025, it commanded a 97% share of deal value. The trend towards fewer, higher value deals was reflected in the fact that its share of deal volume fell to just under 62%.
EMEA accounts for just 2% of deal value and over 23% of total deals in an indication of the relative paucity of major deals in the region during the period. While total EMEA deal value in 2025 is broadly in line with the first half of 2024, that is not necessarily good news as it means that the region has fallen even further behind the US.
There are some signs of growth driven by the increased momentum of AI development and adoption, but the mood among investors in the region remains cautious.
On the other hand, in a trend witnessed in 2024, capital from the Middle East is increasingly shaping global deal flow. For instance, Saudi Arabia is ramping up its AI and GenAI investments, with the Public Investment Fund (PIF) backing domestic and international ventures to position the Kingdom as a regional AI hub.
Notable EMEA deals during the first half of 2025 included Berlin-based Parloa’s $120 million Series C funding round,12 bringing its valuation to $1 billion, fellow German company legal AI specialist Noxtua’s $92 million Series B round,13 and Israel based AI21 Labs’ $300 million Series D round.14
This investment imbalance is reflected in AI unicorn statistics. Of 39 acknowledged AI unicorns around the world, just three are in Europe, two in Israel while 29 are in the US. This asks deeper questions about the state of innovation in Europe and if it will be possible for the region to close the investment gap with the US.
Unfortunately, there is little or no prospect of achieving global agreement on AI regulation. The Chinese government is investing significantly in AI with the quantum of investment difficult to track. Middle Eastern countries are seeking to position themselves as a hub for the technology as they prepare their economies for a post-fossil fuel world. Meanwhile, the US is powering ahead both in investment and innovation terms.
There is a view that where the innovation happens really doesn’t matter as long as Europe can benefit from the advances. However, there has been a reassessment in light of the Draghi Report15 and other developments. There is a growing recognition that this is a strategically important question for EU economic and technological sovereignty in the same way that semiconductors are.
Regulation matters in numerous ways, but probably most acutely in relation to access to data. Countries in the Middle East, for example, enjoy better access to data and this gives them a distinct advantage in the development of AI products and services along with the financial firepower of sovereign wealth funds to back them.
The EU is responding, and the European Commission has designated 13 member states to host a network of AI Factories, strategically distributed across the continent to ensure widespread access to AI resources and to foster regional innovation. It also plans to mobilise more than €20 billion annually from public and private sources for investment in AI. Along with those initiatives there are plans to promote AI adoption in public services and SMEs and to train 250,000 AI professionals with a focus on inclusivity and regional distribution.
These are all important steps but there is still some way to go on regulation. For instance, OpenAI has made a strategic proposal to the EU that emphasises the need for policy clarity and calls for streamlining of the EU AI Act and other moves to enable safe experimentation.
Unfortunately, Ireland has lost out in the competition for EU AI hub locations. This was due to the perceived inability of the country to deliver a datacentre of the scale required to support a hub. This is another area in need of Government attention. Meanwhile, the Government has recently unveiled an updated National Development Plan (NDP) that outlines a total investment of €275.4 billion for the period from 2026 to 2035, representing an increase of €34 billion compared to the previous NDP. The updated plan includes €10 billion in equity funding for key projects in energy, water, and transport. This unprecedented investment aims to secure Ireland's future by addressing housing needs, upgrading infrastructure, expanding road networks, and enhancing public transport services.
The plan to mobilise capital is welcome but more needs to be done in this area as well as the €20 billion target is likely to represent only a small proportion of global VC investment, if and when it does materialise.
It should be noted that access to capital is limited in the UK as well. This may be related to a higher degree of risk aversity on this side of the Atlantic than that which pertains on the US West Coast. The UK Government has recently introduced incentives to encourage pension funds to invest in emerging technologies and early-stage enterprises. With their ageing populations and swelling pension funds, this could usefully be copied in Ireland and Europe.
Despite high levels of AI adoption in Ireland - 63% of Irish startups have adopted AI, with 36% embedding it at the heart of their business models according to a recent report produced by Amazon Web Services16 – the funding environment for early-stage Irish AI companies remains challenging. The pain point for these companies tends to be in the €1 million to €10 million funding space. Just above the level where the State through Enterprise Ireland and the Ireland Strategic Investment Fund is able to meet their funding needs and below the level where they can attract the attention of international VCs.
For Ireland, the strategy should be similar with fintech and green tech an obvious area of focus for future AI development.
Venture capital investment in GenAI continues to accelerate, breaking new records for deal value despite a fall in volume. The shift in focus witnessed during 2024 has become even more pronounced in the first half of 2025 with investments increasing concentrated on more established companies rather that higher risk start-ups and earlier stage firms. US dominance both in terms of GenAI innovation and investment has grown markedly since 2024, and Ireland and Europe will need to up their collective games if they are to foster the establishment and growth of new AI start-ups with the capacity to scale and attract the attention of global VC investors.
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