--- title: "2025 Predictions" description: "12 bold predictions for 2025: IPO market rebounds, AI voice interfaces dominate, first $100M ARR company with 30 employees, and stablecoin supply hits $300B." categories: ["trends"] keywords: ["Theory Ventures","Tomasz Tunguz","venture capital","AI predictions","SaaS trends","IPO market","stablecoin","data lake architecture","web3 growth"] ai_summary: "Explore bold predictions for 2025, including trends in AI, IPOs, and venture capital market dynamics." date: 2024-12-20 lastmod: 2026-07-30 canonical_url: https://www.tomtunguz.com/2025_predictions/ author: "Tomasz Tunguz" --- Every year I make a list of predictions & score [last year’s predictions.](https://tomtunguz.com/2024-predictions/ ) Here are my predictions for 2025. 1. **The IPO market rips**. ServiceTitan's success has revealed the retail & instititutional demand for high growth software. Stripe, Databricks & many others generate huge liquidity for VC funds. The pull from the public market & desire for AI drive M&A to 5 year highs, enabled by a laxer FTC M&A policy. 2. **Google continues their surge in AI**. They lept from no placement to top 1 or 2 on the [OpenRouter rankings](https://openrouter.ai/rankings?view=month). They further advance their market share. Grok benefits from Elon's position in government to become a viable contender with OpenAI & Anthropic. 3. **Voice becomes a dominant interface for humans** with AI as speech models are pushed on device & the accuracy/latency astounds. Voice produces text, image, & video. Why type? It's the start of a generation of people who will never learn to type on a keyboard. (This one will be hard to grade!) 5. **US VC investment remains roughly around $210-$230b, but VC fundraising increases by 20%** as LPs invest some distributions into the asset class, in pursuit of AI growth. 7. **Consolidation is the theme for the Modern Data Stack**. Buyers look to standardize on single platforms as cost-pressures persist. More than $3b of M&A in the category is announced. Software & data engineering teams continue to fuse. 8. **The first $100m ARR company with 30 or fewer employees is created**. An AI native product coupled to an AI native team produces incredible market cap creation efficiency. 9. After years of declines, **the US web3 engineering populations grows by 25%** as the government embraces crypto & web3. This opens to the door to 30% more token listings & a successful consumer app built on a web3 stack. 10. **Data center spending by hyperscalers eclipses $125b** for the year as the AI race fuels demand for GPUs. Broadcom is the hottest semiconductor stock of the year. 11. **Stablecoin supply increases 50% to $300b** as more businesses adopt this payment mechanism for B2B payments. Stablecoin volume is greater than 3x Visa's transaction volume. 12. **Observability, SIEM, & Business Intelligence begin to use the same data lake.** Usage-based pricing for many software companies creates a need for a single data lake. The data lake becomes the dominant data architecture across all workloads. Here are my predictions from last year. 1. **The IPO market remains closed through the first 6 months of the year**. But a few mega issuances, especially Stripe & Databricks in the summer or fall, re-open it for others. The Fed cuts rates, which helps. ****Score****: 0. Only 3 IPOs! Maybe next year! 1. **M&A accelerates throughout the year.** The anticipation of a rate change drives fear of target acquisition valuations. In the last two years, M&A has totaled about $49b & it surges to above $60b driven by AI acquisitions. PE becomes an important buyer of companies growing [10-25%, as it did in 2018,](https://tomtunguz.com/pe-in-saas/) driven by lower debt costs. ****Score****: 0.9. M&A was up $10b y/y but not so much by AI. 1. **AI & data continue to dominate the funding landscape** as founders & investors seek novel applications of the technology. A handful of companies achieve record-setting growth rates. ****Score****: 1. AI funding is now half of all VC funding. Companies are attaining record growth rates. 1. **The share of AI-enabled web searches approaches 50% of all consumer search** as consumer behavior patterns evolve, especially on mobile. ****Score****: 1. Most [GenZ & Millennials](https://www.theverge.com/press-room/2024/4/26/24139468/artificial-intelligence-survey-data) default to AI search, & for many Google.com search, an AI Overview graces the top of the page. 1. **The BTC ETF drives a resurgence in interest in web3 financing**. The winter forced many companies to evolve from open-source projects to revenue-generating businesses. We see the first broadly successful tokens with dividends (likely outside the US). This innovation reinvigorates very early-stage IPOs. We also see more ARR-based web3 businesses achieving scale. Record inflows into tokens fuel all-time highs in Bitcoin, Solana, & higher performance L1s who [offer better price/performance to market](https://tomtunguz.com/aws-eth-cost-reductions/). ****Score****: 1.0. BTC at $100k & the ETF is the fastest growing ETF in history. 1. **US VC investment falls from $275b in 2022 to $200b in 2023 & sustains at about $200-220b in 2024** as LP interest in venture attenuates after the euphoria in 2020 & 2021. Valuations remain relatively steady except for AI businesses, which command a premium to market of about 10-25%. ****Score****: 0.7. US VC investment totaled $210b in 2024. AI premiums are closer to 2-5x. 1. **The discussion around AI regulation becomes a critical topic** in the US during the election because machine-generated content exacerbates international meddling in US politics. But the overwhelming desire for the US to continue to lead the innovation wave it started creates [safe harbors](https://www.copyright.gov/512/#:~:text=The%20safe%20harbors%20shield%20qualifying,content%20and%20meeting%20certain%20conditions.), the same provisions which enabled the web to flourish, are applied to AI. ****Score****: 0.5. Yes, AI regulation was a hot topic. But the election impact didn't materialize as expected. 1. **Companies & startups in particular begin to report meaningful improvements in productivity from AI**, reducing their headcount growth, but growing revenue just as much as projected. ARR per employee increases 10%, [twice the decade long average](https://tomtunguz.com/revenue-per-employee-2023/). ****Score****: 0.7. Microsoft, ServiceNow, & Salesforce all report productivity gains from AI measured in the hundreds of millions of dollars. 1. **Data lakes become the dominant data architecture across business intelligence** & observability workloads as more startups leverage Amazon S3 free replication. Cloudflare R2's architecture for very large data sets drives a meaningful growth in its usage, predominantly for AI. ****Score****: 0.5. The narrative in data has certainly become the data lake. The R2 architecture hasn't materialized. Total : 6.3/10 Down from [4.0/5.0 last year](https://tomtunguz.com/2024-predictions/ )! But it was an election year so I'm cutting myself some slack.