The AI boom is fueling a renewed interest among venture capitalists in ambitious "moonshot" investments, reminiscent of the long-shot bets that historically built Silicon Valley. This shift is driven by the significant returns seen from early SpaceX backers and declining valuations for traditional software companies, pushing investors towards riskier, more capital-intensive deep tech projects.
Ideas once considered too outlandish, such as nuclear fusion and brain-computer interfaces, are now attracting VC firms that previously would not have considered them. Max Hodak, co-founder of Science (a brain-computer interface startup) and Neuralink, notes that VCs' prior focus on software was a "detour" from the hardware ventures that initially established Silicon Valley. Matt Robinson, a partner at Accel, observed a significant change in the types of companies VCs are now discussing.
Excluding investments in major AI labs, global investment in "deep tech" (companies based on significant scientific or engineering advancements) has exceeded $150 billion since the start of 2024. This figure surpasses the $133 billion invested in the entire decade leading up to the end of 2019, according to Dealroom. This increase highlights a growing trend of VCs embracing greater risk-taking after an extended period post-dotcom bust, where the focus was primarily on predictable enterprise software companies.
While this year's deep-tech investments have not yet surpassed the 2021 peak (which was driven by battery and electric vehicle deals that often soured, like Rivian and Northvolt), the massive capital flowing into AI model companies is sparking interest in ventures that could revolutionize data center power, space-based solutions, and other science-fiction concepts. AI-powered simulations are also reducing the cost of experimentation in fields like fusion and space technology, thereby lowering the initial capital requirements for these hardware ventures.
However, the timeline for commercialization and return on investment for these moonshot ideas remains uncertain. Notable deep-tech deals outside of AI this year include space startups like Sierra Space, Axiom Space, and Iceye, as well as fusion startups such as Helion, Proxima, and Inertia. The success of SpaceX's IPO, which turned a roughly $600 million investment into a stake worth over $50 billion, is also creating a "fear of missing out" among investors, potentially leading to a "Cambrian explosion of new start-ups" in the space industry.
