Excitement around AI is showing no signs of slowing down in 2025: Sifted data found in the first half of the year, investments in AI-native startups (companies developing generative AI applications, AI agents and specialised AI hardware) in Europe reached €3.04bn. That’s 61% more than at the same time in 2024 (€1.89bn).
The number of investors who have made at least one investment in an AI-native European startup in Q2 2025 (342) is nearly three times what it was in Q1 2024 (128).
“The main story of H1 is that the AI opportunity is overwhelming,” says Creandum general partner Johan Brenner. “Every day you’re learning about new businesses that can be disrupted by the tech. It’s a firehose of opportunities.”
The first six months of 2025 abounded with examples of this. UK-based video generation startup Synthesia kicked off the year with a $180m Series D at a $2.1bn valuation, and a few months later raised an undisclosed amount from Adobe. Swedish vibe-coding agentic AI startup Lovable secured a $15m pre-Series A in February, and was reported to now be on track to raise more than $150m at a valuation of $1.8bn.
Then in March DeepMind spinout Isomorphic Labs, which leverages AI for drug design, announced it had raised $600m in one of Europe’s largest ever AI rounds, led by OpenAI and Stripe-backer Thrive Capital. France’s Mistral, one of Europe’s best valued AI startups at €5.8bn, is now in talks to raise as much as $1bn in equity from investors including Abu Dhabi fund MGX.
“As an investor, I’m more excited than ever [about AI] because we’re finally seeing real-world applications, not just promises,” says Elise Stern, investment director in the venture team at French VC Eurazeo.
The AI boom
Although investments in AI are growing fast year-on-year, investors aren’t throwing money at the same type of AI companies they were 12 months ago.
“We still need the foundational models, which are the basis of the application layer,” says Hala Fadel, managing director for growth at Eurazeo. “But now we are entirely looking at applications.”
In particular AI agents, which are systems that can automate complete tasks without a human in the loop, have grown remarkably. Sifted data shows the technology is Europe’s fastest-growing sector, with deal count in H1 2025 climbing 226% year-on-year and funding reaching €1.7bn.
Notable companies in the space include Lovable, which has built a platform to turn prompts into apps and websites, and German startup Parloa, which raised a $120m Series C round in May at a $1bn valuation, and specialises in AI agents for customer service.
Mistral recently added agentic AI functionalities to its offering, while Synthesia is also expected to push into the AI agent market later this year. German AI defence unicorn Helsing is also working on AI agents for the battlefield.
At the same time investors are preparing for a bust cycle, with warnings some agentic AI companies are raising money at inflated valuations for products that might not live up to expectations.
The first half of 2025 saw a number of high-profile AI companies lose some of their shine. In March it emerged that London-based 11x, which builds AI agents for sales services, had seen high churn rates due to a buggy product. French AI agents startup H Company, which raised a $220m seed round in 2024, saw its CEO step down last month amid growing concerns about the company’s leadership and vision.
In May UK-based startup Builder.ai, which uses AI to help clients build customised apps, entered insolvency proceedings before reports it had ‘faked business’ with clients emerged, months after it replaced its CEO and restated financial accounts.
“Every new tech wave comes with its share of hype and with it, a bubble,” says Stern. “That doesn’t mean real value won’t be created. A handful of companies will break out and define the era, but many others will crash and burn. That’s the cycle — and historically, each wave has still ended up generating more value than the last.”
AI for sovereignty
With US president Donald Trump’s administration implementing fresh protectionist policies, and Chinese AI companies like DeepSeek and Monica gaining traction, Europe has been keen to boost homegrown AI players to ensure the region remains competitive.
At the AI Action Summit in Paris in February, French president Emmanuel Macron announced €109bn in AI investments over the next five years — a direct response to the Stargate infrastructure project unveiled by the US government a few weeks earlier, which earmarked $500bn for AI.
Since then, Mistral has laid out plans to move into AI infrastructure through the launch of cloud services powered by the startup’s own compute platform and data centre.
The UK government also announced plans to boost AI infrastructure in the country, with commitments of up to £14bn from a group of companies for data centre projects. This included a £2bn commitment from data centre startup Nscale.
As Europe positions itself as a “challenger” to the US and China in AI, says Fadel, many opportunities are emerging. Eurazeo just announced a billion-euro growth fund focusing on AI; earlier this year Paris-based investor Cathay Innovation also closed a €1bn multi-stage fund dedicated to AI.
It’s attracting the attention of investors from abroad. Sifted data shows US investor activity ticked up in Europe in H1 2025, representing 20.4% of all deals compared to 19.1% in H1 2024. The largest increases in activity were concentrated in AI and deeptech.
“Europe’s AI application layer is quietly taking the lead. YC, Speedrun and other US accelerators are expanding slots and actively doing road shows across London, Berlin, Paris and Amsterdam,” says Laura McGinnis, principal at Balderton Capital.
“These founders match their US peers in ambition and execution, but benefit from more rational valuations. Many of these founders are spending 3-6 months in California, before returning to Europe — perhaps a sign that Silicon Valley’s glamour is wearing off.”
Update: This article was amended on 17 July to reflect that a group of companies committed to investing £14bn in data centre projects in the UK.
Read the orginal article: https://sifted.eu/articles/h1-2025-european-ai/
