Tech M&A and investment show resilience in a volatile market

The tech sector remains the most targeted sector for M&A by value and volume and global tech M&A and investment grew in 2024 and early 2025. Yet the sector is dealing with the headwinds affecting the wider market and dampening investor confidence, and sector specific impacts from the US-China trade war, and we have not seen the robust rebound in deal flow anticipated for 2025.

The imposition of tariffs and retaliatory measures, rapid fire policy changes in the US, and inflation are impacting the market, and in a volatile climate, investor caution has slowed dealmaking. The impacts have been felt across the globe to varying degrees, and the outlook is mixed across different sectors and regions. 

Tech M&A

Global M&A growth in 2024 continued into the first quarter of 2025 and software continued to be the most targeted sub-sector, as companies prioritise acquisitions that enable AI and digital transformation. However, globally there are regional disparities in tech M&A activity.

North America contributed around 60% of the value of global tech M&A in 2024 and 75% in Q1 2025, with deal value increasing by 40% year-on-year. Although Europe and Asia Pacific also saw significant growth in deal value in Q1 2025 compared to Q1 2024 — up 64% and 35% respectively—their share of the value of deals fell to just over 10% each, as the US dominated.

Tech investment trends in the US, Europe and Asia

Global tech investment in 2024 exceeded the previous year’s investment for the first time since the record highs of 2021 and continued in an upward trajectory in Q1 2025. However, the number of deals continued to decline indicating investment activity is skewed towards late-stage mega deals. 

In Q1 2025 US companies remained dominant, attracting 79% of the value of global tech investment, and AI and digital infrastructure featured prominently in the top deals which included OpenAI's record $40bn raise, X’s $13.5bn and Aligned Data Centers’ $12bn. Tech investment in the US in Q1 2025 doubled compared to Q1 2024, though the US market was bifurcated between the handful of companies that have been able to raise significant capital and the rest of the market that continues to struggle through a capital shortage. 

By comparison, investment in European tech increased in value by more than 30% year on year in Q1 2025, reaching $14 bn — just exceeding the total investment in Q4 2024. However, the number of deals declined sharply during this period, falling by one third compared to Q1 2024. The top funded sectors in Q1 2025 were fintech ($5bn) and AI ($4bn). Climate tech investment declined by 10% year on year in Q1 2025 as investment in the sector continued to fall, having been the most funded sector in 2023. 

In Asia investment activity remained subdued, with Q1 2025 marking the lowest quarter by value since 2015. Singapore was the only major Asian hub to see a growth in tech investment in 2024, supported by substantial growth capital funding of data centres, including DayOne ($1.9bn) and ST Telemedia ($1.3bn). Funding activity in China continued to decline, both in terms of value and volume of investments.  The top deals in Asia reflect a wider range of top tech verticals in Q1 2025, with semiconductors and data centre deals prevalent as well as AI-related deals. AI accounted for around 20% of investment value in 2024 and Q1 2025.

AI

Major 2025 deals feature significant raises by AI trailblazers such as OpenAI (record $40bn raise), Anthropic ($4.5bn raised over 2 rounds), and other firms addressing applications across industries, from robotics and biotech to defence. AI’s outsized impact is evident, as it accounts for many of the industry's largest transactions and continues to drive innovation globally.

Investment in AI will likely continue to attract the highest levels of investment, with investments ranging from small language models, robotics, and agentic AI to AI-driven solutions for industries such as defence tech, health and biotech.

Digital infrastructure

The growth of AI is also reshaping the digital infrastructure landscape, with surging demand for data centres and energy to power them sustainably. Projections indicate data centre capacity will need to triple within five years, accompanied by a growing need for efficient, consistent, carbon-neutral power.

Investments in Q1 2025 underscore the scale of this opportunity: US-based Aligned Data Centers raised $12 billion, US-based Data Bank raised $2.9 billion and Singapore-based DayOne raised $1.2 billion.  Major tech firms are expected to spend as much as $1 trillion on AI in the coming years, benefiting sectors providing vital infrastructure, such as chipmakers, power utilities, and cloud service providers. 

Landmark developments include initiatives announced this year such as the US $500 billion Stargate project supported by OpenAI, Microsoft, Oracle, SoftBank and MGX to scale up US infrastructure and the French project to invest €109 billion in AI infrastructure, which was announced in February at the AI Action Summit in Paris.   

Defence tech

Rising global tensions and the conflicts in the Middle East and Ukraine present heightened security risks and have brought a new urgency to enhance and modernise defence capabilities. This has brought a step change in funding from governments and has accelerated investment and innovation in defence technology.

Investment in defence tech has soared in the last 5 years and Q1 2025 saw significant investment in defence tech companies like Saronic Technologies ($600 million) and Shield AI ($240 million). In the defence sphere, there is also growing interest in space tech, driven by the strategic importance of space to national security. Satellites are key to defence strategies for communications, surveillance and navigation; and enabling free movement for military forces while blocking adversaries. As a result, we expect investment in defence tech and dual-use technologies to continue to grow. 

Public markets

The public markets saw modest improvement in tech IPO activity in late 2024, but levels remained far below the highs of 2021. In Q1 2025, the IPO market was subdued though CoreWeave, a US AI Cloud company, went public at a pre-money valuation of US $21.7 billion to become the largest AI-related listing at that date and has since had a post-IPO stock price rally of 340% as at 17 June. More recently, Circle, the issuer of US-backed stablecoin USDC, listed on the New York Stock Exchange on 5 June with a pre-trading valuation of US $6.8 billion and shares surged more than 400% after listing. 

Another bright spot has been the Hong Kong exchange which has been attracting capital for Chinese high end tech manufacturing, bolstering the outlook for Hong Kong’s capital markets. CATL, the world’s biggest battery manufacturer, raised US $4.6 billion in May and at the time of listing became the world’s biggest listing of 2025. 

While the pipeline is robust, market volatility has deterred many startups from going public and as a result, some companies may pursue strategic exits through acquisitions instead. Meanwhile, continuation funds and minority stake sales are providing liquidity options for investors in late-stage private tech firms. Uncertainty in the market remains a challenge, but a backlog of profitable unicorns suggests future potential for growth in IPO activity, particularly if market conditions stabilise.

Looking ahead

Ongoing geopolitical tensions and macroeconomic uncertainties will weigh on investor confidence in the short term given the amount of uncertainty in the market. However, while broader market conditions may dampen sentiment, the resilience of tech M&A and investment suggests deal activity could return later in the year if tariffs, policy changes and interest rates stabilise, and investors and corporates adapt to the new economic realities of the market. 

High levels of dry powder held by financial sponsors provide a cushion for sustaining deal flow, particularly as valuation gaps narrow. We expect AI, digital infrastructure, and defence technology to remain focal points, with cybersecurity, fintech, and health tech also standing out as growth opportunities.