Silicon Valley VCs have a new king: Physical AI. According to the “Physical AI. Shaping the Market of the New Possible” Report presented today by Mind the Bridge at the Scaleup Summit San Francisco, in partnership with Crunchbase, VC investments in Silicon Valley today essentially mean AI investments. Out of the $111 billion raised by scaleups in 2025, AI absorbed a staggering $103.5 billion (equal to 93% of total).
This concentration of capital, unprecedented even by Silicon Valley standards, is transforming the very definition of venture capital.
“AI is gorging venture capital: 93 cents of every VC dollar in the Valley now goes into AI,” noted Alberto Onetti, Chairman of Mind the Bridge. “Physical AI seems to follow the same explosive trajectory as Generative AI. The bets are huge, the risks equally so – but history shows that these capital-intensive cycles often produce the breakthroughs that redefine entire markets.”
The report identifies a turning point in this cycle. After the rise of Generative AI, which between 2023 and 2025 attracted mega-rounds from OpenAI ($40 billion) and Anthropic ($13 billion) and consolidated around a few foundational players, attention is rapidly shifting toward Physical AI. This new frontier integrates advanced AI with physical systems, creating machines capable not only of processing and reasoning but of acting in the real world. Unlike traditional robots confined to pre-programmed routines, Physical AI systems can adapt to unpredictable environments, with applications ranging from factory automation and surgical robotics to defense, agriculture, and even consumer products.
The early signs are unmistakable. In the first three quarters of 2025 alone, Physical AI scaleups raised $16.1 billion. Major deals include Meta’s large-scale investment in Scale AI, a platform for training data and real-world applications; Figure AI’s $675 million round to accelerate humanoid robotics; and Neuralink’s $650 million raise to push forward brain–computer interfaces. These sums underscore the capital intensity of the field, but also its ambition: nothing less than bringing intelligence from the digital into the physical realm.
“Silicon Valley is experiencing another turning point,” explained Marco Marinucci, CEO of Mind the Bridge. “If Generative AI represented the rise of thinking machines, Physical AI marks the transition to acting machines. This wave will transform industries from the factory floor to the operating room, from defense to daily life.”
Large incumbents are already jockeying for position. NVIDIA has built a full-stack infrastructure – spanning training, simulation, and deployment – to power the sector. Google’s DeepMind is infusing its Gemini models into robotics, while Meta is taking an open-source path with its world-model initiatives. Qualcomm is betting on edge AI with the recent acquisition of Edge Impulse, Amazon is deploying AI to coordinate its million-strong robot fleet, and Tesla is pushing ahead with its vertically integrated humanoid robot program, Optimus.
The report situates this shift within the broader history of Silicon Valley’s innovation waves, from semiconductors and personal computers to the internet, cloud, and social media. With AI now absorbing almost the entirety of venture capital in the Valley, the emergence of Physical AI signals the start of yet another potentially transformative cycle—one that could once again reshape industries and everyday life worldwide.
“We are two to three years into a new investment cycle. Despite the billions raised by foundation model companies, we are still in the early stages of funding to AI, which will shape the next two decades,” said at the opening of the Scaleup Summit Gené Teare, Senior Data Editor at Crunchbase. “In the shorter term, the lack of liquidity is the biggest concern for the venture capital ecosystem.”
The “Physical AI. Shaping the Market of the New Possible” Report is the latest in Mind the Bridge’s series of studies monitoring global innovation trends. It provides an in-depth mapping of more than 2,700 AI scaleups in the Bay Area.
On the occasion of the Scaleup Summit in San Francisco, Mind the Bridge also updated its prior research on “Tech Scaleups”, “Corporate Innovation Outposts” and government-led initiatives (“Ecosystem Builder Outposts”), plus launching a brand-new analysis of the VC landscape.
All reports are available for download on the MTB Ecosystem platform as well as a directory and interactive map.