Allied Advisers Sector Update: Look Back at AI M&A in 2025

Allied Advisers is pleased to present this report on M&A activity in the AI sector in 2025. AI deal activity accelerated sharply in 2025, with total deal value reaching ~$61B, almost double 2024 levels. This growth is fueled by fast-moving GenAI/LLM innovations, the race to build AI infrastructure, increasing pressure on enterprises to deliver tangible AI results, and a shortage of specialized AI talent.

This surge raises a key question: where is deal activity concentrated most in the AI space? In 2025, M&A activity is primarily clustering around deployment-ready, scalable verticals – AI infrastructure, AI applications, and agentic AI. Big Tech buyers increasingly prefer a “buy over build” approach, securing scarce capabilities, talent and speeding time to market, while traditional enterprise software companies are adopting a hybrid strategy of acquiring proven AI businesses while continuing in-house development, using targeted M&A to integrate critical AI building blocks and accelerate product roadmaps.

Value creation is strongest where AI delivers measurable, near-term ROI, making coding and customer support (CX) the key valuation hotspots. These functions account for a large share of AI investment and command strong valuations, making category leaders appealing acquisition targets. Investors are also actively investing in niche AI categories, including LegalTech, humanoid robotics, neocloud, and frontier model platforms, where rapid scaling and rising valuations are expanding opportunities for both strategic M&A and selective IPO pathways.

Looking ahead, AI dealmaking is expected to remain centered on scalable, deployment-ready capabilities, where speed to execution and enterprise impact continue to drive strategic value.

At Allied Advisers, we look forward to partnering with founders and investors to navigate this exciting landscape.

Download the full report here