Investors Shift Focus to Physical AI as Funding Surpasses Previous Years

Venture capital investment in physical AI companies has surged in 2026, with global funding reaching $47.4 billion in the first half of the year. This marks a significant increase compared to the second half of 2025, which saw $12 billion in funding, and a nearly 80% rise from the first half of 2025. Combined funding from 2022 to 2024 totaled $41.9 billion, still lower than the amount raised in just the first half of 2026. Physical AI encompasses industries such as robotics, autonomous vehicles, aerospace, drones, industrial automation, and sensors. Several large deals contributed to the spike in investment. Waymo’s $16 billion Series D round, led by Alphabet, Dragoneer Investment Group, DST Global, and Sequoia Capital, accounted for nearly one-third of all venture dollars raised in the first half of 2026. The round was valued at $126 billion. Other notable investments include SpaceX’s $75 billion IPO at a $1.77 trillion valuation, HawkEye 360’s $416 million raise, and Aevex’s $320 million funding. Mobileye’s $900 million acquisition of Mentee Robotics, a Tel Aviv-based humanoid robotics startup, also stood out as a significant M&A deal. Ryan Ziegler, general partner at Edison Partners, highlighted that physical AI represents the convergence of software, hardware, sensors, and IoT, enabling real-world applications. He noted that AI’s ability to process data at scale and speed, combined with decreasing hardware costs, is driving investment. Edison Partners is particularly interested in high-value, traditionally analog industries where physical AI can become mission-critical infrastructure, such as manufacturing, supply chain, utilities, agriculture, transportation, and government. Joe Fath, partner and head of growth at Eclipse Capital, emphasized that AI and other enabling technologies are reducing the capital intensity of physical industries. He pointed to the alignment of technology, talent, capital, demand, and policy as key factors driving investment. Eclipse Capital defines physical AI broadly as intelligence embedded in systems that perceive, reason, and act in the real world, focusing on both infrastructure and applications. Fath expects value to accrue throughout the physical AI stack, with the strongest moats belonging to vertically integrated companies that own multiple layers.