- Funding for GenAI continued to climb in 1H2025, reaching record levels
- S&P Global Market Intelligence analysts said application companies got 4x more funding than AI infrastructure companies
- But there seems to be a mismatch between funding levels and enterprise satisfaction with the AI products they're using
We’ve all heard about the GenAI bubble by now. It seems rather than bursting it has continued to balloon in 2025, with funding in the first half of the year reaching record-breaking levels.
S&P Global Market Intelligence laid out the data in a webinar this week, noting that while the number of funding rounds in 1H25 was quite low compared to previous years the cumulative value of those rounds skyrocketed.
The first half of the year saw GenAI companies across the stack (spanning chips, models, software tooling and applications) rake in nearly $80 billion in funding, the firm’s data showed. That’s up from the under $60 billion the same cohort secured in 2024.
“The way this is going, I don't think there is an end in sight for now to the record-breaking funding,” S&P Global Market Intelligence’s Iuri Struta said.
Turning tide
Struta chalked much of the increase to foundation model providers that have been raking in cash. But that said, the balance of funding allocated to infrastructure and application players shifted dramatically in favor of the latter in H125 from a relatively even split in 2024.
“We're seeing that in the first half, AI applications [received] 4x more funding than AI infrastructure,” Struta said.
The bulk of that money is admittedly going to foundation model players. But even excluding these outsized deals, application funding over that last three quarters was nearly double the previous three, Struta said. Specifically, valuations appear to have jumped from $1-1.5 billion rounds to $2-2.5 billion.
“Many of these companies have built strong businesses that are not capital-intensive, so they don't need multibillion-dollar funding rounds,” he said pointing to CursorAI and Windsurf as examples. “They're growing at a very high speed. They're reaching now hundreds of millions of dollars in revenue and valuations of low-digit billion dollars.”
AI letdown
There’s good reason funding is pouring in for GenAI companies. Gartner forecast that spending on GenAI products (that is, software, services, devices and servers) will jump from $365 billion in 2024 to $644 billion this year.
But while the investor providing GenAI funding seem to be getting the expected returns for now, both Gartner and S&P’s Senior Research Analyst Alex Johnston indicated enterprises may not feel like they’re getting their money’s worth.
“I'd say that the technology has been taken up very rapidly and potentially not as deeply as some organizations would have liked,” Johnston said. “Either it's not being used effectively or the application areas that's been applied to haven't been as effective as they hoped.”
John-David Lovelock, Distinguished VP Analyst at Gartner, predicted this paradox of billions in funding running against dissatisfied customers will continue throughout 2025 and even into 2026.