Despite economic headwinds and shifting policy priorities, climate tech investment remained surprisingly resilient in 2025, holding steady relative to the previous year, according to data from CTVC. This stability challenges predictions of a downturn and suggests a growing recognition that many climate technologies are becoming economically competitive with traditional fossil fuels. The continued demand for solutions addressing climate change, coupled with advancements in key areas like energy storage and renewable generation, are driving this sustained interest.
While some anticipated a decline following policy adjustments and broader economic concerns, the sector demonstrated an ability to withstand pressure. This resilience is particularly notable given the increased scrutiny of government subsidies and the evolving landscape of international climate agreements. The year’s performance indicates a maturing market where technological viability and economic factors are increasingly important, rather than solely relying on policy support.
The Dominance of Data Centers in Climate Tech Investment
The surge in demand for artificial intelligence (AI) and the associated need for massive data center infrastructure has become a central driver of investment in the climate tech space. Data centers require enormous amounts of electricity, creating both a challenge and an opportunity for clean energy solutions. This trend, largely predicted at the start of 2025, is expected to continue shaping the industry in 2026.
Investors surveyed overwhelmingly agree that data centers will remain a focal point. Tom Chi, founding partner at At One Ventures, noted that the substantial financial commitments already made by hyperscalers suggest continued investment, even amidst economic uncertainty. Po Bronson, managing director at SOSV’s IndieBio, echoed this sentiment, observing a consistent focus on data centers across numerous corporate discussions.
Shifting Focus from Demand to Resilience
In 2025, the primary concern surrounding data centers was securing sufficient power supply. However, Lisa Coca, partner at Toyota Ventures, believes the conversation will shift in 2026 towards ensuring the resilience of that power supply and accelerating efforts to decouple from the traditional grid. This decoupling could alleviate concerns about grid strain and rising electricity costs for other consumers.
The need for reliable, clean power is also benefiting technologies like geothermal, nuclear, solar, and battery storage. Daniel Goldman, managing partner at Clean Energy Ventures, highlighted that zero-carbon generation is already cost-competitive and that advancements in battery technology are further accelerating cost reductions.
Potential for an AI Bubble Burst
While the connection between AI and energy demand is strong, some investors acknowledge the possibility of an AI bubble. Kyle Teamey, managing partner at RA Capital Planetary Health, suggested that even if a bubble were to burst, the infrastructure investments already planned are unlikely to be significantly affected. Andrew Beebe, managing director at Obvious Ventures, anticipates a potential correction in the data center market in 2026 or 2027, but believes the underlying demand for electricity will remain robust.
Beyond Data Centers: Emerging Trends in Climate Tech
Looking beyond the immediate impact of data centers, several other trends are gaining momentum within the climate tech sector. Anil Achyuta, partner at Energy Impact Partners, emphasized the growing importance of reindustrialization and rebuilding domestic supply chains for critical components like batteries and power electronics. This focus on supply chain security is driven by geopolitical concerns and a desire to reduce reliance on foreign manufacturers.
The pursuit of new power sources continues, with nuclear fission experiencing a resurgence in investor interest. Recent funding rounds exceeding $1 billion suggest a growing confidence in the potential of advanced nuclear technologies. However, the long lead times associated with nuclear power mean that it will take years to significantly impact the energy mix.
The Rise of Alternative Battery Chemistries
Grid-scale battery deployments reached record levels in 2025, and this trend is expected to continue. Leo Banchik, director at Voyager, pointed to the emergence of alternative battery chemistries, such as sodium-ion and zinc, as a key factor in driving down costs and increasing adoption. He also noted a more disciplined approach to scaling battery manufacturing, learning from past failures.
Geothermal and the Potential for Scalable Growth
Geothermal energy is also attracting increased attention, particularly enhanced geothermal systems. Joshua Posamentier, managing partner at Congruent Ventures, believes geothermal has the potential for rapid growth, comparing its trajectory to that of solar energy. The ability to tap into consistent, renewable heat sources makes geothermal a promising long-term solution.
Focus on Grid Execution and Resilience
Amy Duffuor, general partner at Azolla Ventures, highlighted the need for improved grid execution, emphasizing the importance of software and hardware solutions that can accelerate interconnection, planning, and deployment of new energy projects. Resilience and adaptation to the impacts of climate change are also becoming increasingly important themes, with investments in technologies like robotics for wildfire mitigation gaining traction.
Matt Rogers, founder at Incite and Mill, underscored the potential of combining AI with physical infrastructure to transform industries like manufacturing, life sciences, and food systems. He believes that the integration of AI and smart hardware will be crucial for achieving significant emissions reductions.
Ultimately, the climate tech landscape is dynamic and evolving. While data centers currently dominate investment, a diverse range of technologies and sectors are poised for growth in the coming years. The success of these ventures will depend on factors such as technological innovation, cost competitiveness, and supportive policy frameworks.
Looking ahead to 2026, the industry will likely see continued investment in data center infrastructure, alongside advancements in energy storage, geothermal, and critical minerals. The potential for an AI bubble burst remains a concern, but the underlying demand for clean energy solutions is expected to persist. Monitoring policy developments, technological breakthroughs, and the evolving dynamics of the global energy market will be crucial for understanding the future trajectory of the climate tech sector.
