Nearly half of all global startup funding this 12 months went to AI startups. Many see this concentration as a warning sign and an indication that media hype is distorting the market. But in reality, this wave of AI investment is expanding the opportunities for each founders and investors to put the foundations for the recent firms and industries that may emerge around this revolutionary technology.
In the second quarter of 2025 alone, global enterprise capital funding reached $91 billion, of which roughly $40 billion (about 45%) went to artificial intelligence firms, largely driven by record rounds OpenAI AND AI scales.
Sixteen firms gained a third of all global capital this quarter. By the third quarter, almost half of all startup funding went to AI, with a third going to a single company. We’re at a point where sometimes pre-seed startups are unicorns, with growth-stage valuations exceeding 100 times revenue, but this is largely the exception, not the rule.
Warning lights flash. However, this level of concentration and the occasional outlier are a signal that we are in the early stages of a generational platform reasonably than the tail end of a speculative bubble.
Infrastructure rounds seed an entire recent economy
History has shown that once capital accumulates around a disruptive technology, it is rarely contained. Netscape’s debut in the Nineteen Nineties attracted massive investment in the Internet and ushered in the era of browsers, servers, software and infrastructure that became the basis of the modern Internet.
The same pattern appears today. Mega AI infrastructure rounds provide the technical foundation on which future platforms can be built, which also triggers a wave of company formation at every layer of the stack. These firms will handle every part from model training and inference to data management.
As this base layer hardens, the wave of applied innovation can be faster and more powerful than anything we have seen since the mobile and cloud technology boom.
We’re already seeing this taking shape as entrepreneurs retreat AnthropicOpenAI and other leaders to launch startups in areas corresponding to legal automation, robotics and drug discovery. Operators who have spent the last decade building SaaS or fintech are now reimagining the same sectors through the prism of artificial intelligence.
Investors who once avoided deep tech are developing recent theses around it. The center of gravity could also be near a few large AI firms, but opportunities radiating outward abound throughout the ecosystem.
Real firms, real revenues, real ROI
Critics argue that too much capital in one sector creates instability. And yes, valuations are elevated and investors are right to be demanding. However, many of those AI firms already are generating real income and providing customers with a measurable return on investment.
Some of the firms in my portfolio are emblematic, corresponding to:
- EliseAI is used by 28 of the 30 largest multifamily owners and operators to automate as much as 90% of their leasing and rent collection processes, resulting in lower labor costs, increased lease conversion rates and lower rent arrears.
- Valence enables enterprises to offer personalized coaching to tons of of 1000’s of employees, increasing productivity and retention.
- Exodigo uses multi-sensor equipment and artificial intelligence to map what’s underground before work begins on large infrastructure projects. Customers avoid costly utility strikes that cause greater than $125 billion in damages each 12 months. These firms generate measurable and scalable ROI for customers.
These are not the hallmarks of a bubble economy, where economic reality is ignored and often driven by debt, but reasonably an equity-financed productivity boom with tangible economic impacts. Although there have been ups and downs during the Industrial Revolution, the efficiency of using, say, a cotton gin in comparison with human labor was not erased. The total impact of the AI revolution on productivity could possibly be orders of magnitude greater.
Therefore, the current moment is not a zero-sum game. For every billion dollars put into the basic model, 1000’s of startups are created to implement these advances in specific markets. As these startups grow, they increase productivity and create recent data, infrastructure needs, and entirely recent categories. The feedback loop between infrastructure and application defines every major technology cycle.
For long-term investors, technology is your only friend
Technology’s share of GDP has increased from 1-2% about 50 years ago to 14% today. In 20-30 years it could possibly be 28-50%. Tech as a percent of the S&P is 45%. In the future, this percentage could possibly be over 70%, with most of this value being created in the private sector.
Economists know that two things have driven economic growth over the past 200 years: (first) population growth and (second) recent goods and services. As population growth slows, investors looking for growth will turn to recent goods and services. And most of those recent goods and services? Tech.
Those who gave up on technology 20 years ago as too dangerous have been seriously harmed. Just look at those who remained on European stock indices. The next 20 years can be much more painful if we do not have enough exposure to technology. And private markets are a key allocation given this recent AI-powered productivity revolution.
Why this cycle will move faster and reward technology-enabled investors
We’re also starting to grasp why this cycle is so different from the SaaS era. Historically, the average SaaS company needed about seven years achieve $20 million in annual revenue.
Enterprise AI software vendors will reach this milestone in the next two years. Many top-performing firms are growing well over 200% annually, twice as fast as last-generation software firms, and achieving profitability much faster. As long as AI firms proceed to create real, measurable economic impact on their end users, this boom can be based on fundamental value, not speculation.
The real winners in this cycle can be the builders who turn today’s massive infrastructure investments into the next generation of sustainable firms. Investors who understand how you can participate correctly can be best prepared for what comes next.
The enterprise capital market does not shrink around a few giants; opens recent frontiers with extraordinary speed. As an investor, you possibly can reap the benefits of this wave in many ways. On Alpha Partnerswe imagine that winning in this hyper-growth environment means collectively investing in market leaders with solid fundamentals, clear customer ROI, a disciplined approach to valuation and a focus on vertical application businesses. There are enormous opportunities for investors and entrepreneurs who keep their heads down and focus on building great firms that add value to their customers, our economy and society.