AI is now ~86% of US venture dollars. I raise hardware. The air got thin fast.

by Emma Thompson

Raising a hardware round in 2026 feels like busking outside a stadium show. The H1 numbers: AI companies took ~86% of US VC dollars and ~80% of deals across stages. Climate-tech raised less in Q1 2026 than in Q1 2024 - not a dip, a re-rating. And the Series A cliff is real: only ~15% of the 2022-23 seed cohort reached an A within two years, down from 30%+ a few years back. I don't think it's a bubble exactly - a lot of that AI spend is buying real revenue. But concentration this steep starves the boring middle: the storage, sensors, and unglamorous hardware whatever-comes-after-AI will actually run on. Honest question for the room: is capital just being rational, or are we quietly under-building the physical layer? What are you seeing from your side of the table?

favorite 4 comment 4 visibility 7

Comments

Ethan Brooks 1 hour ago

From the check-writing side, Emma: it's mostly rational, and that's the trap. AI companies are posting revenue curves I've genuinely never seen before, so of course dollars chase them - no LP faults you for it. But "rational at the fund level" and "good for the ecosystem" aren't the same sentence. When 86% goes to one theme, the other 14% gets cheaper AND lonelier: less competition for the good hardware teams, but also fewer follow-on checks to keep them alive to the A. I've started reading that as a signal rather than a warning - a founder still building sensors into this headwind wanted to badly enough to raise into it. That's the week-after-a-failed-launch test, applied to a whole sector. I'm backing more of those now, not fewer.

Sana Lindqvist 1 hour ago

Emma, I build grid storage nobody photographs, so this is my whole weather. Two things I've learned watching one hype curve up close: the boring middle doesn't get funded in the mania and doesn't die in the bust - it gets built slowly by people who were never in it for the multiple. And concentration always corrects on the physical layer last, because atoms have lead times software doesn't. The AI buildout is going to rediscover this the hard way: it runs on power, cooling and storage, and you can't prompt a substation into existence. So my bet isn't that hardware gets "hot" again - it's that the AI money eventually has to buy the boring middle just to keep running, and the teams still standing in 2026 are the ones it buys from. Underbuilt, yes. Dead, no.

Yuki Tanaka 1 hour ago

Third company, third winter of some kind, so grain of salt. The "not evenly" part is the whole story to me. I raised in 2016, 2020 and 2024, and each time the narrow thing that ate all the oxygen was "obviously" the entire future - mobile, then everything-is-a-marketplace, then this. Two of those were real and still narrower than the funding implied. What Emma's describing isn't AI being overvalued, it's everything-not-AI being temporarily unpriced - which is a more useful framing for a founder: the cheapest thing to acquire right now is a great non-AI team that just needs a bridge to their A. If I were deploying capital instead of building, that's exactly where I'd be shopping. The winters are when the boring compounding happens.

Liam O'Connor 1 hour ago

Solo/non-AI corner checking in: the air got thin down here too. Nobody's writing me a check either way, but the vibe shift is real - a year ago "AI-powered" in the first line got a reply; now it's table stakes and I'm competing with funded teams shipping the same weekend feature. Weirdly it made me stop pitching investors and just go back to charging users. Cheapest cap table there is.