Israeli High-Tech Sees AI Dominance in 2025 Funding Rounds

Artificial intelligence companies attracted a staggering 89% of all capital raised by Israeli high-tech firms in 2025, a significant jump from 58% in 2024. These AI companies secured approximately $11.8 billion across 499 funding rounds, accounting for 56% of all such rounds, according to a report by the DatA-IL community. The disparity between the percentage of capital raised and the number of rounds highlights the impact of large-scale investments, with nearly 57% of AI company funding coming from Series C rounds and later. However, the report also points to a definitional challenge, as the broad "AI company" label encompasses diverse entities, from cybersecurity firms using AI for threat detection to those developing AI models or chips.

The report identifies 2,948 AI companies in Israel, representing about a third of the country's high-tech sector. Within this group, approximately 365 are classified as "Core AI" companies, focusing on distinct research and development in AI as their central technology, including model development, computing infrastructure, and chip design. While the broader AI category attracted 89% of funding, these Core AI companies raised about $3.2 billion in 95 rounds, making up nearly a quarter of the total capital. This distinction clarifies that the high funding percentage includes companies utilizing AI, not solely those developing it independently. Guy Holtzman, founder of IVC, notes that this refined definition allows for a more precise analysis of capital flow and company development in Israel, acknowledging that a unified global classification for AI companies is still evolving.

Prominent fields for AI companies in Israel include digital health, fintech, and cybersecurity. The government is also expanding its use of AI, with 97 AI projects underway in 33 ministries, a 35% increase in one year, and over 13,000 public sector employees trained in AI. Half of these government projects involve industry collaboration. While national AI strategy and a national data catalog are being developed, long-term budget, authority, and success metric questions remain. Plans for local AI chip manufacturing and specialized problem-solving centers are also under consideration.

Academia is responding with ten new AI study programs, expecting around 900 students. However, the report raises concerns about the need for advanced researchers and doctoral candidates for core technology development, questioning if these new programs will suffice. Uncertainty also surrounds the continued funding and operation of existing academic AI centers. Overall national R&D expenditure in 2023 saw 93% from the business sector and only 5.5% from higher education, underscoring the industry's dominance and posing a long-term question about Israel's capacity to build the necessary research infrastructure and workforce for indigenous AI technology development.