European businesses attracted VC deals worth a total of €21.9bn in Q1 2026, according to the latest quarterly reports from KPMG and Pitchbook. But while this was the highest level since Q2 2022, the data hides a couple of curious trends, which may spell trouble for companies not riding either of them.
The first is perhaps not surprising: AI (or AI-related) companies are commanding an increasingly large share of deals in Europe, accounting for 61.3% of total investment in the past quarter. This has risen from 36.9% for all of 2025, while it has also exceeded the 50% share Pitchbook originally forecast for 2026 as a whole.
Volume has been on a downwards slope since 2022, when deals topped 4,500
The second trend is related to the first, but may be counterintuitive in the context of the rising total value of investments: the number of VC deals declined in the first quarter, dropping from around 2,100 to 1,983. In fact, volume has been on a steady downwards slope since Q1 2022, when deals topped 4,500.
This is a 56% decline, and it represents increasing concentration in the VC market, as a smaller number of firms soak up an ever-larger share of available funding. This could make it harder for all-but the most successful firms to attract funding or buyers, particularly if their businesses haven’t embraced artificial intelligence in some capacity.
A global phenomenon
It’s worth pointing out that this phenomenon is not confined to Europe, since the data also shows that deal numbers dropped in the US and globally in Q1, and that volumes have been falling in both contexts since the first quarter of 2022.
Such data points towards a globalised long-term trend, rather than some kind of localised anomaly, and it’s very tempting to explain it largely in terms of the emergence and expansion of AI.
As noted above, artificial intelligence companies were the big winners of Q1, with nine of the 10 largest VC deals involving firms that are either AI-native or have incorporated AI into their operations. The biggest European deal of the quarter was a €1.69bn Series C funding round for UK-based infrastructure provider Nscale, while NEURA Robotics (Germany), Wayve (UK) and Cloover (Germany) all secured more than €1bn each.
There’s no doubt that such companies are receiving considerable funding because they’re developing potentially market-leading technologies and services, with investors wanting to tap into their potential growth and make sizeable returns. But it’s arguable that investors aim to do more than that, since if the period since the dot-com bubble has taught us anything, it’s that early-moving tech firms and platforms can end up enjoying enormous network effects, leading to market concentration and dominance.
Is AI turbocharging winner-takes-all dynamics?
For some commentators, such concentration has become more prevalent in parallel with the growth in connectivity and globalisation. This is an argument often made by Black Swan author Nassim Nicholas Taleb, who back in 2012 warned against a career in investment management, arguing that connectivity was amplifying a randomness effect whereby “everything on the planet flows to the ‘top x’, where x is becoming a smaller and smaller share of the top participants.” He reiterated a similar view in a 2025 lecture, declaring that “We now see winner-take-all effects everywhere, owing to connectivity.”
“We now see winner-take-all effects everywhere, owing to connectivity.”
Nassim Nicholas Taleb
In the same lecture, Taleb also touched on Silicon Valley, noting that “replacing Google is harder” now than it would have been in the past, because the company’s “dominance is entrenched, which is unhealthy.” And we’re arguably seeing a comparable process of entrenchment play out with the early wave of AI firms, albeit at a faster rate.
This is supported by investment data from 2025, when Pitchbook reported that 41% of all US venture capital went to just 10 startups: OpenAI, Scale AI, xAI, Anthropic, Infinite Reality, World View, Anduril, Safe Superintelligence, Thinking Machines, and Figure AI. Globally, 68 companies soaked up more than a third of all VC investment last year, according to a report from VNTR, who concluded that the emerging “winner-take-most dynamic” is creating a “two-tier” VC market.
It’s in such a ‘two-tier’ market that AI-related companies are potentially preparing for future dominance, whereas a growing majority of less-funded enterprises are competing for whatever slice of the pie remains. While some have warned that the AI sector is in a bubble that could soon pop, this majority may need to prepare for a world in which the sector continues to grow.
European businesses attracted VC deals worth a total of €21.9bn in Q1 2026, according to the latest quarterly reports from KPMG and Pitchbook. But while this was the highest level since Q2 2022, the data hides a couple of curious trends, which may spell trouble for companies not riding either of them.
The first is perhaps not surprising: AI (or AI-related) companies are commanding an increasingly large share of deals in Europe, accounting for 61.3% of total investment in the past quarter. This has risen from 36.9% for all of 2025, while it has also exceeded the 50% share Pitchbook originally forecast for 2026 as a whole.
Volume has been on a downwards slope since 2022, when deals topped 4,500
