Silicon Valley sees resurgence in hardware as venture capital flows into deep tech

Venture capital is flooding into deep tech startups that build physical things: robots, semiconductors, and the infrastructure required to keep AI systems running at scale. Robotics and physical AI startups raised $16.3 billion across 492 deals in Q1 2026, followed by $18.6 billion across 450 deals in Q2 2026, according to PitchBook data. Hardware companies now account for nearly one-third of US venture capital resources deployed this year.

The numbers tell a clear story

Global funding in robotics and physical AI climbed from roughly $4 billion in 2019 to $26 billion in 2025. By mid-2026, the sector had already surpassed $23 billion, with half the year still ahead.

SVB’s 2026 Physical AI and Robotics Report projects $120 billion in total VC investment into hardware companies for the full year if the current pace holds.

Andreessen Horowitz raised a dedicated $1.1 billion fund in August 2026 called “Machine Age,” focused exclusively on chips and robotics infrastructure.

Recent rounds include a $10 million seed for Robocurve, a robotics benchmarking firm, in September 2026, alongside multiple megadeals scattered across the sector. Defense autonomy is also emerging as a major funding magnet, as governments accelerate spending on autonomous systems.

Why the pivot is happening now

Training and running large language models demands enormous compute, which means advanced chips and data center hardware. Inference at the edge, where AI meets the physical world through robots and autonomous vehicles, requires purpose-built silicon, sensors, and mechanical systems that no amount of clever code can replace.

Supply chain fragility accelerated the shift. The semiconductor shortages that began during the pandemic exposed how dependent the tech industry had become on a small number of overseas fabrication plants.

What this means for investors and the broader market

The capital intensity of hardware startups means deal sizes are getting bigger, and the investor profile is shifting. Traditional seed-stage VCs are partnering with strategic corporate investors, sovereign wealth funds, and defense-oriented backers who understand multi-year development timelines.

Risk is real, though. Hardware startups have longer development cycles and higher failure rates than their software counterparts. A $120 billion annual deployment pace, if SVB’s projection holds, would represent the largest sustained bet on physical technology in venture capital history.

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