Global venture capital ( VC ) investment surged to a ten-quarter high of US$126.3 billion in the first three months of 2025, up from US$118.7 billion in Q4 2024, despite geopolitical tensions, tariff concerns, and the delay of a major reopening in the IPO market, a new report finds.

The overall increase in deal value was largely driven by a series of mega funding rounds by AI companies, including a record-setting US$40 billion raise by OpenAI, according to KPMG Private Enterprise's Venture Pulse, a quarterly report tracking global investment trends.

While VC funding rose considerably given the red-hot investment in artificial intelligence ( AI ), global deal volume continued to plummet, falling to a record low of 7,551 transactions in Q1’25 from 8,801 deals in the previous three months. While many investors remained optimistic, fresh uncertainties prompted others to be cautious on major deals outside of the AI space.

The Americas attracted US$94.5 billion in VC investment in Q1’25, nearly three-quarters of the global total, with the United States grabbing a lion’s share of US$91.5 billion. Europe remained relatively flat, attracting US$18 billion across 1,883 deals, while the Asia-Pacific region continued to experience a significant slump, drawing only US$12.9 billion across 2,149 deals.

“We headed into Q1’25 with some cautious optimism around a renewed sense of business confidence, more investment and more exit activity. That optimism has now abated in the face of the uncertainty caused by various US executive orders and the back and forth on tariffs and trade,” comments Conor Moore, global head of private enterprises at KPMG International. “With expectations for the recovery of the IPO market moving farther out again, we could see a shift in VC firms needing to reallocate investment priorities as some companies may need additional funding prior to a now more distant IPO.”

Exit value remained relatively muted, with just US$78.2 billion seen globally. On a regional basis, exit activity increased in the US but fell to only US$6.6 billion in Asia-Pacific – the lowest level of exit activity seen in the region since 2015.

Red-hot space

AI remained the biggest ticket for VC investors globally in Q1’25, with Open AI’s US$40 billion raise breaking the record for the largest VC funding round ever recorded. During the quarter, US-based Anthropic and Infinite Reality also raised large rounds of US$4.5 billion ( two closings ) and US$3 billion, respectively. Europe and Asia-Pacific also saw strong AI funding. In the APAC region, China-based Neolix Technologies and Univista raised US$137 million and US$137 million, respectively, while Australia’s Harrison.ai raised US$111 million, Hong Kong-based InSilico Medicine drew US$100 million, and India-based Spotdraft attracted US$54 million.

During the quarter, China also saw three new AI models launched, including DeepSeek’s R1 AI model and new models by Tencent and Alibaba. The three models, all said to be more energy-efficient than others on the market, further highlight the competitiveness of the AI space at the moment.

Still, VC investment in Asia-Pacific dropped to US$12.9 billion across 2,149 deals in Q1’25, the lowest levels the region has seen in over ten years. China saw a quarter-over-quarter drop from $10.9 billion to $6 billion, India declined from US$2.6 billion to US$2.4 billion, while Japan fell from US$1.1 billion to $900 million.

Singapore was the sole bright spot in the region, with VC funding rising from US$880 million to US$1.7 billion, driven primarily by a US$1.2 billion raise by Singapore-based DayOne. The firm’s raise was the largest deal in the region during the quarter, followed distantly by a US$688 million raise by China-based SE Environment, and a US$550 million raise by India-based retailer Meesho.

Subdued outlook

The VC market is expected to be quite subdued in Q2’25 as investors remain cautious amid continued concerns over trade conflicts and geopolitical uncertainty, KMPG says. Many investors are taking a wait-and-see approach, holding off on major investments until there is greater clarity in the global economic environment.

The AI space is likely to remain an exception. Industry-specific AI solutions are expected to attract increasing levels of investment, alongside advanced robotics and supporting technologies, such as light detection and ranging ( lidar ), which enhances the effectiveness of autonomous systems. In light of geopolitical tensions, defence tech and cybersecurity are also likely to see increasing attention from VC investors, according to the report.

Global M&A activity could accelerate over the next few quarters, especially in the AI sector. Large technology firms are expected to pursue strategic acquisitions to secure emerging AI capabilities before valuations soar. Additionally, companies seeking alternatives to a volatile IPO market may increasingly view M&A as a more stable exit route.

“AI is driving a large bulk of global VC investment right now, buoying investment levels that might otherwise be soft,” says KPMG International partner Francois Chadwick. “It is an exciting space too, with an incredible reach both in terms of geographies that are attracting investments – if not often at the size of deals in the US – and in terms of the solutions gaining attention. Industry-focused solutions are going to be particularly hot over the next quarter as start-ups continue to target the intersection of AI and industry in order to drive unique business value.”