What happened
Venture capital investment is increasingly bifurcated, heavily favouring AI and defence companies. This concentration of capital has prompted companies like fintech Klarna to secure $1.4bn by advertising as AI-focused before its 2025 IPO, and shoemaker Allbirds to see its stock close 582 per cent higher after pivoting to AI infrastructure. Non-AI and non-defence companies face significant hurdles in securing Series A capital, exacerbated by broader market uncertainty and sticky US Federal Reserve interest rates.
Why it matters
Access to growth capital is now heavily skewed towards AI and defence, creating a challenging environment for founders in other sectors. This mechanism forces companies to rebrand as AI-centric, even if their core business is unrelated, to attract investment. Procurement teams and investors must recognise this capital concentration, as it limits funding options for non-AI ventures and increases the premium on AI-aligned projects. This trend aligns with record funding secured by US AI sector firms in early 2026.
