Investment in physical AI firms has surged dramatically in 2026, signaling a strong shift in venture capital interests. Investors, particularly those traditionally focused on software and internet ventures, are increasingly funding businesses that develop technologies and materials directly associated with the AI expansion, as reported by The Wall Street Journal.
According to data from Crunchbase, global venture capital invested a staggering $47.4 billion in the first half of 2026 across 521 transactions. This represents an almost fourfold increase from the $12 billion raised by physical AI startups in the latter half of 2025, and is a significant rise of nearly 80% compared to the $26.4 billion from the first half of 2025.
To illustrate the financial momentum in physical AI, over the years 2022 to 2024, investors collectively allocated $41.9 billion to the sector, which is notably less than the amount raised in just the first half of this year.
For context, physical AI encompasses various industries including robotics, autonomous vehicles, aerospace, drones, industrial automation, and sensors.
Major deals have heavily influenced the increase in funding. A standout transaction was Waymo's $16 billion Series D funding round in February, which alone constituted nearly a third of the total venture investment. This round was co-led by Alphabet, Dragoneer Investment Group, DST Global, and Sequoia Capital, achieving an impressive valuation of $126 billion.
Other substantial funding rounds in 2026 include:
- Defense technology firm Anduril Industries, which secured $5 billion in May, boosting its valuation to $61 billion—double that of the previous year. - Shield AI, based in San Diego, raised $2 billion in Series G funding, resulting in a valuation of $12.7 billion. - Austin's Saronic, a company specializing in autonomous maritime vessels, raised $1.75 billion in its Series D round, bringing its total funding to around $2.6 billion and doubling its earlier valuation.
The market has also witnessed significant exits in the first half of 2026, with a focus on aerospace, defense, and drones rather than robotics. SpaceX made headlines with a $75 billion IPO at a staggering $1.77 trillion valuation. Other public offerings included HawkEye 360, a space intelligence firm that raised $416 million, and Aevex, an autonomous drone manufacturer that brought in $320 million. In mergers and acquisitions, Mobileye's acquisition of Mentee Robotics for approximately $900 million focused on expanding its physical AI capabilities.
From an investor's perspective, Ryan Ziegler, a general partner at Edison Partners, emphasizes that while funding has typically revolved around robotics and defense, the opportunities for physical AI are much broader. He sees it as a fusion of software, hardware, sensors, and IoT, applicable across numerous real-world contexts. Ziegler notes that advancements in AI are enhancing the ability to process substantial data, generating actionable insights, while the costs of hardware continue to decline.
Ziegler highlighted that mobile devices now feature LIDAR technology, making spatial mapping more accessible. Edison Partners targets sectors such as manufacturing, supply chain management, and agriculture, where physical AI can be integral infrastructure. The combination of software, sensors, and hardware yields valuable datasets over time. They particularly favor investments with measurable ROI metrics in areas like predictive maintenance and autonomous operations.
The landscape for developing these technologies has also improved over the last two years, akin to the revolution cloud infrastructure brought to software as a service (SaaS). Ziegler points out that advancements in AI infrastructure, cheaper hardware, and better training data have streamlined the creation of these companies, allowing businesses to implement recurring revenue models more effectively.
Joe Fath, partner at Eclipse Capital, notes that while physical industries retain high capital requirements, AI and enabling technologies are transforming operational efficiency. Historical hesitance from investors due to large capital needs is changing; the reduction of technical barriers and an influx of skilled professionals are driving investments toward production-ready companies.
Fath articulates Eclipse's long-term commitment to physical AI as a fundamental investment philosophy since its inception in 2015. The evolving technical and economic landscape allows firms within this realm to innovate and customer engagement has accelerated. Eclipse interprets physical AI as systems that can perceive, reason, and act within the physical world, focusing investments on the infrastructure supporting AI rather than standalone models.
The current environment is deemed ripe for investment by both Fath and Ziegler, who argue that powerful technology, improved talent access, and demand alignment are catalyzing growth in the sector. Fath anticipates that within the comprehensive physical AI framework, companies integrating multiple operational layers will secure the most enduring competitive advantages. Ultimately, he concludes that business success hinges on translating technical capability into reliable, scalable operations that leverage data effectively.
