Artificial Intelligence Global Report H1 2025 | AI Investment & Deal Trends | Insights

SOFTWARE & SERVICES

• The Software & Services segment accounts for the lion’s share of M&A, PE, and VC activity within the AI vertical and has seen strong transaction activity in 2025 as strategics look to bolster existing platforms and offerings, while private capital investors aim to corner winners in the AI arms race.
• Transaction activity in the Software & Services segment is expected to continue to grow at a rapid clip in 2025 and beyond, supported by enterprises doing deals to add to product offerings and tech stacks, along with investors capitalizing on rapidly growing valuations as use cases and adoption proliferate.
• AI adoption is expected to fuel a wave of consolidation in the Software & Services segment, as Big Tech companies acquire or hire talent from late-stage unicorns and look to layer service capabilities on top of their cloud computing infrastructure.
  • Microsoft, Alphabet, Amazon, and Meta intend to spend a combined $320 billion on AI technologies and infrastructure in 2025, up from $230 billion in total capital expenditures in 2024.
• Agentic AI is poised to be the next frontier due to its ability to autonomously understand and execute tasks.

“LLMs are competing to deliver the best inference stack to enterprises, which includes reasoning capabilities and strong AI governance. With sophisticated reasoning and adaptive learning, agentic AI will be able to make decisions and take actions to achieve business goals with minimal human intervention.” – Brett Klein, Head of East Coast Technology Banking at Morgan Stanley (March 20, 2025)

HEALTHCARE & LIFE SCIENCES

• HCLS comprised the second-highest share of M&A and VC activity across the AI vertical, as strategics pursue assets that enhance existing operations and accelerate research & development. Recognizing the broad range of applications for AI across HCLS, VCs are racing to invest in transformational technology.
• Adoption of AI in HCLS organizations has occurred rapidly, with all respondents in a McKinsey survey (summer 2024) of 100 Pharma and MedTech leaders indicating that they have experimented with GenAI and 32% indicating that their companies have taken steps to scale the technology.
  • While only 5% of respondents in the McKinsey survey indicated that they have used GenAI as a competitive differentiator to generate consistent and significant financial value, two-thirds of respondents plan to significantly increase investment in the technology in 2025.
  • Life Sciences organizations have adjusted their 2025 GenAI budgets to accommodate capital expenditure needs, demonstrating bullishness regarding AI technology and an appetite for new investments.
• In a sign of rising optimism regarding the ability of AI to transform the HCLS industry, many of the new unicorns in 2025 are developing HCLS technology, including Pathos, Abridge, Isomorphic Labs, Hippocratic AI, and InSilico Medicine.

ROBOTICS & OTHER HARDWARE

• Sophisticated foundational models have yielded “embodied AI,” accelerating the leap from specialized to general-purpose robots.
• Embodied AI enables robots to analyze inputs, such as sensor data, and adjust responses based on those inputs in real time.
• Due to the prospect of general-purpose robots, investment has shifted to a new ecosystem including startups collecting data, creating foundational models for robots, and developing fleet software.
• General-purpose robotics funding grew fivefold from 2022 to 2024, surpassing $1 billion in annual investment, while patent filing volume has expanded at a 40% CAGR since 2022.
• While robots are being deployed in industries like manufacturing and construction, startups are developing software to bring robots into labor-intensive sectors like caregiving.

“There’s no question, we’re not tied to a single piece of hardware. Right now, we’re just coming out of the too-early stage. This is going to create the next trillion-dollar companies.” – Howard Morgan, Chair of B Capital (Pitchbook, February 19, 2025)

“Robotics will take a little longer, but I think we’ll have the ChatGPT moment in the next two to three years…almost everybody in the 2030s will have a humanoid robot at home.” – Vinod Khosla, Founder of Khosla Ventures (Business Insider, July 1, 2025)

“With every technical transformation, there will be fewer people doing some of the jobs that technology actually starts to automate. Are there going to be other jobs? We’re going to hire more people in AI and more people in robotics.” – Andy Jassey, CEO of Amazon (Business Insider, July 1, 2025)

PRIVATE EQUITY

• While PE firms are investing in the AI infrastructure build-out, they are also harnessing the technology to enhance and accelerate deal sourcing, diligence, and execution.
• AI agents could represent the next frontier, as they can perform tasks traditionally handled by humans—enabling PE firms to streamline operations and enhance execution efficiency.

AI Is Revolutionizing PE Dealmaking Process

• Underwriting: AI accelerates underwriting decisions, which is especially critical in private credit where timely due diligence is essential to secure a deal.
• Investment Committees: Several firms, including General Atlantic and Schroders Capital, have established dedicated AI roles on their investment committees to enhance decision-making.
• Document Comparison: Firms are developing tools to analyze and compare contracts and documents to flag potential issues before deal execution, as demonstrated by Blackstone’s Document AI.
• Deep Company and Sector Analysis: Firms are leveraging AI for in-depth company and sector analysis, enabling them to rapidly grasp industry trends and uncover opportunities ahead of competitors.
• Deal Sourcing: GenAI equips investment teams with insights on potential targets, which they then use to prompt AI agents to automate outreach–replicating the functions of a traditional deal origination team.

Sources: KPMG; PEI

“While most companies will be affected by AI, PE firms are likely to be facing the greatest opportunities and risks and will also have to be the best and fastest at navigating this disruption.” – Per Edin, Board Committee Chair at KPMG (March 1, 2024)