AI Capital Cycle

Author

Nicole Rojas
December 15, 2025

Week of December 15th, 2025

Welcome to AlphaInsights, 8alpha.ai’s weekly newsletter, your ultimate source for curated insights and key updates from the dynamic world of venture capital!

From billion-dollar rounds to market-defining shifts, we deliver the intelligence powering the global investment landscape, moving investors and innovators forward. At 8alpha.ai, we’re not waiting for the future of capital, we’re building it. Stay sharp, stay curious, and stay ahead.

STARTUPS

ROUNDS AND UNICORNS

  1. Saviynt (AI Identity Security): Identity security provider Saviynt raised $700 million in Series B funding led by KKR, valuing the company at $3 billion

  2. Unconventional AI (AI Energy Efficiency): AI hardware startup Unconventional AI secured $475 million in seed funding led by Andreessen Horowitz and Lightspeed Venture Partners to build energy-efficient computing for AI

  3. Fervo Energy (Geothermal Energy): Geothermal developer Fervo Energy raised $462 million in Series E funding led by B Capital to expand its geothermal projects, including a major buildout in Western Utah

  4. Boom Supersonic (Aerospace & Energy): Supersonic aircraft maker Boom Supersonic closed a $300 million round led by Darsana Capital Partners to advance its aircraft and turbine technology, with potential applications in AI data centers

  5. K2 Space (Space Tech): Satellite platform company K2 Space raised $250 million in Series C funding led by Redpoint, valuing the 2022-founded company at $3 billion

Seed funding in 2025 showed there is no “new normal,” only continued volatility, as the market was defined by outsized rounds, AI dominance, and growing concentration in the U.S. Investors backed nearly 700 seed rounds of $10 million or more, putting the year on track for a record, while U.S. seed financings of $100 million+ topped $3.6 billion, driven largely by mega-deals like Thinking Machines Lab’s $2B raise and Unconventional AI’s $475 million round

  • AI was the clear winner, capturing over 42% of global seed funding, more than $15B, up about 50% from 2024

  • U.S. startups attracted roughly $18B, nearly half of all global seed investment, the highest share in years

  • Together, these trends point to a robust but increasingly concentrated seed market, where investors are placing much larger early bets on a smaller group of perceived winners, stretching the traditional definition of what a seed round represents

Direct lending rebounded in the three months through Nov. 30 as a wave of mega-deals lifted volumes to $69.8 billion, the highest since Q2 2024, narrowing the year-over-year decline to 9% from 15% in October, even as deal count fell to 201, the lowest since Q4 2023. Activity was concentrated in large transactions, with seven $1B+ deals in November and LBO financings surging to $23.7 billion, the strongest level since Q2 2022, reflecting direct lenders’ advantage amid volatility in broadly syndicated loan markets

  • While Business Development Company portfolios returned to growth in Q3, overall activity remains below last year

  • Refinancings into broadly syndicated loan (BSL) markets slowed sharply, though early December jumbo deals suggest refinancing momentum could pick up

  • BSLs are large corporate loans arranged by banks and then syndicated to many institutional investors (such as CLOs, mutual funds, and hedge funds), rather than held by a single lender

US Venture Capital Outlook (PitchBook, 30 minute read)

The U.S. venture market enters 2026 with cautious optimism, similar to early 2025, as public markets remain near record highs, GDP growth has rebounded to about 3.8%, and further rate cuts are expected, even as liquidity remains the sector’s biggest challenge. Regulatory uncertainty has eased now that the Trump administration has largely implemented its agenda, reducing the risk of surprise policy shifts and supporting modest improvement in M&A, IPO activity, and secondary-market liquidity

  • Exit values rebounded in 2025 but are still expected to stay below $300B

  • Large deals dominate, with 91% of exit value from $500M+ exits

  • AI remains the core driver of venture optimism, capturing ~65% of U.S. VC deal value and producing over half of new unicorns

  • AI startup valuations now exceed $1T, with the strongest momentum at early stages

ECONOMIC SNAPSHOT

President Trump signed an executive order directing federal agencies to challenge state-level AI laws, arguing that a fragmented regulatory “patchwork” hurts startups and that AI should be governed federally as interstate commerce. The order instructs the Justice Department to form a task force within 30 days to contest certain state laws, gives the Commerce Department 90 days to identify “onerous” regulations that could affect states’ access to federal funding, and asks agencies like the FTC and FCC to explore federal standards while working with Congress on a national framework

  • Supporters say the move could centralize AI regulation, but critics warn it will prolong uncertainty and legal battles, leaving startups stuck between state and federal rules

  • Founders argue the ambiguity hits smaller companies hardest, raising costs, slowing innovation, and giving Big Tech an advantage until Congress sets a clear national standard

The Federal Reserve delivered its third rate cut of 2025, lowering rates by 0.25 percentage points to a 3.5%–3.75% range, as officials noted moderate economic growth, slowing job gains, and a rising unemployment rate. Chair Jerome Powell said AI-driven investment, particularly in data centers, has helped support business spending, but warned that delayed data from the government shutdown complicates near-term decisions, with inflation risks tilted upward and employment risks downward

  • The 9–3 vote reflected internal divisions, and Powell declined to signal further cuts in early 2026

  • Markets were little changed, while the move offered modest support to a fragile IPO and M&A recovery that has been repeatedly disrupted by tariffs and the shutdown

The November jobs report, delayed by the 43-day government shutdown, is expected to show weak hiring of about 40,000 jobs with unemployment holding at 4.4%, but economists caution the data will be noisy because it combines partial October figures. Federal disruptions, including buyout-driven payroll reductions affecting an estimated 100,000–150,000 federal workers (around 5% of federal employment), could distort results, potentially producing an October net job loss of ~65,000 despite a 55,000 private-sector gain, following 119,000 jobs added in September

  • Other indicators already point to cooling momentum, with ADP estimating +47,000 jobs in October and –32,000 in November, alongside stalled hiring, rising layoffs, and slowing wage growth

  • Job gains remain concentrated in health care and services, underscoring uneven labor market strength

  • Overall, economists see the labor market stuck in a low-growth range of roughly 0–50,000 jobs per month, with September likely the recent high-water mark rather than the start of renewed strength

The White House is taking an unusually public approach to selecting the next Federal Reserve chair, with Treasury Secretary Scott Bessent and President Trump openly discussing the timing and potential candidates as Jerome Powell’s term ends in May. An announcement had been floated for before Christmas but is now expected in early 2026. According to recent reporting, the leading contenders include Kevin Hassett, director of the National Economic Council, and former Fed governor Kevin Warsh, who have recently carried estimated odds of about 50% and 40%, respectively

  • Hassett has extensive experience advising Republican administrations and has expressed generally dovish views on interest rates

  • Warsh, who served on the Fed’s board from 2006 to 2011, has argued publicly that inflation outcomes reflect policy choices and that AI could be a disinflationary force

  • Other potential candidates include current Fed governor Christopher Waller, whose recent dissents have drawn attention, and BlackRock fixed-income CIO Rick Rieder, an external candidate with public- and private-sector experience

 

Kevin Hassett’s once-dominant candidacy to succeed Jerome Powell as Fed chair has faced growing pushback from influential figures around President Trump, amid concerns that his close ties to the White House could undermine perceptions of Fed independence and unsettle bond markets. That resistance has coincided with the rise of former Fed governor Kevin Warsh as a stronger alternative, a shift reflected in prediction markets where Hassett’s odds have fallen from above 80% to about 51%, while Warsh’s have climbed to roughly 44%

  • Trump has publicly praised both candidates, but the evolving dynamic helps explain delayed and rescheduled interviews and suggests the decision remains open

  • In response to the criticism, Hassett has emphasized that, if appointed, he would preserve the Fed’s independence and base decisions on data rather than presidential influence

IPOs & EXITS

SpaceX is advancing plans for a potential IPO as soon as mid-to-late 2026 that could raise more than $30 billion and value the company around $1.5 trillion, making it the largest listing in history and surpassing Saudi Aramco’s $29 billion IPO in 2019. Fueled by rapid growth in its Starlink satellite internet business and progress on its Starship rocket, SpaceX is expected to generate about $15 billion in revenue in 2025 and $22–$24 billion in 2026, mostly from Starlink

  • The company is already preparing through insider share sales valuing it above $800 billion and allowing employees to sell roughly $2 billion in stock

  • Proceeds from a future IPO would help fund ambitions such as space-based data centers

Several of the world’s largest private startups are signaling IPOs as soon as 2026, potentially unleashing up to ~$3 trillion of new public-market value. SpaceX is the centerpiece, targeting a $1.5 trillion valuation, which would surpass Saudi Aramco’s $29B record IPO. Other AI “centicorns,” including Anthropic, Databricks, and possibly OpenAI (valued $500B+), are also weighing listings. Markets are near all-time highs, and investor enthusiasm for AI, space, and crypto remains strong

  • That optimism is colliding with concern: many of these companies have limited profits and rely on future growth assumptions

  • Investors worry about a repeat of dot-com–era excess or a WeWork-style reset if valuations overshoot reality

  • A large IPO wave would broaden access to high-growth companies, but analysts warn that great companies don’t always make great stocks

Netflix’s proposed $82.6 billion acquisition of Warner Bros., whether completed or not, underscores a pivotal moment for Hollywood as tech giants increasingly dominate the entertainment industry. The deal would mark another major wave of consolidation following Warner Bros.’ prior merger with Discovery and signals how far Netflix has evolved from a DVD-by-mail startup into a potential owner of a legacy studio

  • Analysts and industry observers remain divided over whether the scale and complexity of Warner Bros.’ businesses, from theatrical releases to theme parks, justify the acquisition price

  • Others warn the deal could pose significant execution risks for Netflix, especially amid regulatory scrutiny and a competing hostile bid from Paramount

  • While the transaction could significantly strengthen Netflix’s content library and market power, unions, theater owners, and critics warn it may further erode Hollywood’s traditional ecosystem

WHAT A TIME TO BE ALIVE

Climate tech investment is increasingly shifting from pure decarbonization toward resilience and adaptation, benefiting climate risk technologies as companies focus on managing operational and financial exposure amid regulatory uncertainty. Although U.S. regulatory pressure has eased, with the SEC dropping its climate risk disclosure rule in March 2025, making reporting voluntary, corporations remain highly concerned about climate-related risks. VC-backed startups are responding with solutions such as parametric insurance for agriculture, energy, and manufacturing, as well as AI-driven predictive analytics and geospatial monitoring

  • However, VC funding in climate risk tech has fallen sharply from a peak of $499.4M in 2021 to $276.9 million in 2023 and is projected to drop to just $163.1M in 2025, even as deal counts remain relatively steady

  • North America continues to dominate, accounting for 77.1% of global deal value by Q3 2025, with most capital concentrated in later-stage VC rounds while venture growth deals remain scarce

AI8 VENTURES HIGHLIGHT

State of VC Report: The AI Power Law

“Every technological revolution has two halves: the bubble and the golden age that follows.”

Carlota Perez, economist and author of Technological Revolutions and Financial Capital (2002)

The stock market is at all-time highs, but inflation remains sticky and the job market is weakening. Ask around and you’ll hear the same refrain: the labor market feels tougher than ever. At the same time, the first wave of AI agents is “joining the workforce”. Imagine a software engineering agent capable of performing most tasks of a mid-level developer. Now imagine thousands. Extend that across every knowledge field, and the implications for productivity, and potential displacement, are profound.

What happens when the next round of layoffs hits? Add tariffs on top, and ask what happens if consumption weakens. Even the Federal Reserve admits it is unsure of what comes next.

Against this backdrop, venture capital in 2025 is not in recovery but in recalibration. The illusion of recovery is powered almost entirely by AI. Capital is flowing, but to fewer companies than ever. Outside AI, down rounds are rising, and nearly half the unicorn population hasn’t raised since 2022.

We are living in an AI bubble. Just four megacaps, Nvidia, Meta, Microsoft, and Broadcom, accounted for 60% of the S&P 500’s gains, with Nvidia alone responsible for more than a quarter. It’s a paradox. Yes, we’re in a bubble, but it’s also the future. We are witnessing what may be the most important technological shift in a generation. It’s hype layered on top of something undeniably real.

Uncertainty is the name of the game; not one single path forward, but divergent scenarios. Alpha will be earned through selectivity, by navigating volatility rather than avoiding it.

8alpha.ai is an AI fintech transforming cash-generating businesses into scalable, AI-powered companies. We provide revenue-based financing and hands-on AI transformation, delivering no zeros with unlimited upside. We’re the architects building financial infrastructure for the next generation of investors and startups.

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Happy reading,

8alpha.ai’s Research & Investment Team