Health Tech Investment Surges in H1 2025, Driven by AI Advancements

In the first half of 2025, the healthcare sector witnessed a significant shift in venture capital investment patterns, with health tech emerging as a bright spot amid overall industry slowdown. According to a recent report by Silicon Valley Bank (SVB), artificial intelligence (AI) has become a major driving force behind this trend, reshaping the landscape of healthcare innovation and investment.

Health Tech Funding Reaches New Heights

Despite challenges in the broader healthcare fundraising environment, health tech startups in the U.S. and Europe secured an impressive $8.2 billion across 358 deals during the first half of 2025. This marks the strongest first-half performance for the segment since early 2022, accounting for approximately one-third of overall healthcare investment—its largest proportion since 2021.

Jackie Spencer, head of relationship management for life science and healthcare banking at SVB, noted that over 60% of health tech funding is now linked to companies utilizing some form of AI. "From a VC perspective, these business models can be very sustainable, and there is a clear path to profitability," Spencer explained.

AI-Driven Administrative Solutions Take Center Stage

A notable trend within the health tech sector is the growing focus on AI applications for administrative and back-office functions. Tools aimed at reducing administrative workload, rather than clinical tasks, accounted for 44% of AI funding in the first half of the year.

"There's an obvious use case for it, and there's a clear cost savings that can be shown to ultimately the buyers of the technology," Spencer commented. "Not to mention, the back office in healthcare is very, very convoluted, very archaic. It's ripe for disruption."

M&A Activity Heats Up

The health tech sector has already witnessed several high-dollar mergers and acquisitions in 2025, with private M&A spending nearly matching the combined total of the past three years. Non-traditional buyers, including venture-backed companies with available cash, are emerging as key players in the M&A landscape.

One notable example is Waystar, a healthcare payments firm that went public in 2024, which recently signed a definitive agreement to acquire AI-backed revenue cycle management company Iodine Software. Additionally, private equity firms continue to actively pursue and consolidate point solutions in the health tech space.

Spencer anticipates a positive outlook for M&A activity, stating, "I anticipate M&A to be a bit rosier of a story, just because there are multiple buyers and there is still a lot of capital out in the market."

While the health tech sector shows promising growth, it faces its own set of challenges, including potential impacts from recent Medicaid cuts and rising medical costs in Medicare Advantage programs. However, the increasing adoption of AI-driven solutions and the sector's resilience in attracting investment suggest a dynamic and evolving landscape for healthcare technology in the coming years.