AI All the Way Up: Why Artificial Intelligence Is Eating the VC and Growth Equity World

The Great Capital Migration

If you’ve been watching the venture capital and growth equity landscape lately, one thing is abundantly clear: AI isn’t just getting a seat at the table—it’s becoming the table, the chairs, and most of the dining room.

The numbers are staggering. In the first half of 2025, AI startups captured a whopping 53% of all global venture dollars. In the US alone, that figure jumps to 64%. When nearly two-thirds of all venture capital in the world’s largest tech market flows to a single technology category, we’re not witnessing a trend—we’re watching a fundamental market transformation.

But why? What’s driving this unprecedented concentration of capital, and what does it mean for investors, founders, and the broader innovation ecosystem?

Show Me the Money: AI by the Numbers

Let’s get specific about just how dominant AI has become in the funding landscape:

• AI startups now represent 29% of all funded startups globally and 36% in the US
• In Q1 2025 alone, AI commanded $59.6 billion in global funding
• Fund allocation to AI has exploded from 5.4% in 2022 to 24.5% in 2025
• In Q2 2025, more than one-third of all US venture dollars went to just five AI companies

This isn’t just growth—it’s a seismic shift in how capital is being allocated. The last time we saw anything remotely similar was during the early internet boom, but even then, the concentration wasn’t this extreme.

Why AI Is Swallowing the Investment World

1. Real Revenue, Real Adoption

Unlike the speculative bubbles of the past, today’s AI investment boom is built on tangible enterprise adoption. Companies aren’t just experimenting with AI—they’re deploying it at scale and seeing measurable ROI.

The most successful AI startups are generating real revenue with impressive growth rates. Take Enterprise AI platform Jasper, which reached $125 million ARR in just 18 months—growth rates that make even the most seasoned VCs do a double-take.

2. The Compounding Advantage

AI exhibits powerful network effects that create winner-take-most dynamics. As AI systems collect more data, they improve, attracting more users, generating more data, and so on. This compounding advantage makes early leaders exceedingly difficult to unseat.

This dynamic creates a rational urgency among investors. If you believe AI will transform multiple industries (and the evidence suggests it will), then getting behind the emerging category leaders isn’t just an opportunity—it’s an imperative.

3. Infrastructure Gold Rush

Much of today’s AI investment isn’t going toward flashy consumer applications but toward the picks and shovels of the AI revolution: specialized chips, data infrastructure, AI development platforms, and vertical-specific models.

This infrastructure layer is where the most sustainable value is being created. Companies like Databricks ($43B valuation), Scale AI ($13B valuation), and Anthropic ($18B valuation) are building the foundational technologies that will power thousands of AI applications for decades to come.

4. Mega Rounds for Mega Computing

Developing frontier AI systems requires unprecedented computing resources. OpenAI’s latest $40 billion financing round—the largest private funding round in history—reflects this capital-intensive reality.

These aren’t typical venture investments. As one prominent VC noted: “Many foundational AI model deals resemble project finance more than traditional venture capital, with different risk-return profiles and capital requirements.”

The New Geography of AI Investing

The AI funding surge has also reshaped the geographic distribution of venture capital. While Silicon Valley remains the epicenter, new AI hubs are emerging globally:

• Toronto has leveraged its academic strengths to become North America’s second-largest AI hub
• London dominates European AI investment, capturing 67% of the continent’s AI dollars
• Seoul has emerged as Asia’s AI powerhouse, fueled by Samsung’s aggressive AI push

This geographic diversification reflects AI’s universal potential. Unlike previous tech waves that were primarily US-centric, AI innovation is genuinely global—and so is the capital chasing it.

How AI Is Changing VC Decision-Making

In a delicious twist of irony, AI is also transforming how venture capitalists make investment decisions. Leading firms now employ sophisticated AI systems to:

• Identify promising startups before they hit the mainstream radar
• Analyze founder backgrounds and predict team effectiveness
• Assess market opportunities and competitive dynamics
• Optimize portfolio construction and reserve allocation

As one top-tier VC partner told us: “The firms that aren’t using AI to make investment decisions are already at a significant disadvantage. It’s not about replacing human judgment—it’s about dramatically expanding what’s humanly possible.”

Winners and Losers in the AI Capital Concentration

The AI funding boom has created clear winners and losers:

Winners:

• Established AI-native startups with proven technology and commercial traction
• Infrastructure providers enabling AI development and deployment
• Specialized AI investors with deep technical expertise and pattern recognition
• Enterprise software companies successfully incorporating AI capabilities

Losers:

• Non-AI startups competing for increasingly scarce venture dollars
• Traditional VCs without AI expertise or access to top AI deals
• Late entrants to competitive AI categories
• Companies with AI capabilities that don’t translate to business value

Looking Ahead: Is This Sustainable?

The question on everyone’s mind: Is this level of capital concentration sustainable, or are we witnessing another bubble?

The evidence suggests this is more structural shift than speculative mania. Unlike the dot-com or crypto booms, AI companies are generating substantial revenue and solving real business problems. The technology’s capabilities are advancing exponentially, opening new markets and use cases almost monthly.

That said, not all AI investments will succeed. We’re likely to see significant consolidation, particularly among similar AI application companies targeting the same verticals. The infrastructure layer may prove more durable, as these companies benefit from the success of the entire ecosystem rather than winning specific application categories.

The Implications for Founders and Investors

For founders, the message is clear: either be in AI or be exceptional elsewhere. Non-AI startups need to demonstrate truly extraordinary metrics and market opportunities to compete for capital in this environment.

For investors, specialization has become critical. General technology investors without deep AI expertise are finding themselves increasingly disadvantaged when competing for the most promising deals.

At Lever Venture, we believe that understanding the fundamental drivers of AI’s capital magnetism is crucial for navigating today’s investment landscape. Whether you’re an AI-native company or incorporating AI capabilities into an existing business model, the technology’s dominance of the capital markets is a reality that will shape investment strategies for years to come.

The AI revolution isn’t just changing technology—it’s reshaping the entire venture capital and growth equity ecosystem. And we’re still in the early innings.