- Israel's AI sector emerging as a pillar of the
country's tech ecosystem. Currently, approximately 25%
of Israel's tech startups are dedicated to artificial
intelligence, according to The Jerusalem Post, with these companies
attracting 47% of the total investments in the tech sector (Startup Nation Finder). This strong presence
highlights Israel's focus on AI-driven innovation and
entrepreneurs' belief in the growth opportunities related to
AI. The Israeli AI market is expected to grow at a compound annual
growth rate of 28.33% from 2024 through 2030, reaching a value of
$4.6 billion by 2030 (Statista). This growth is driven by increasing
demand for AI applications across diverse industries such as health
care, cybersecurity, and fintech. Government-backed initiatives,
including the National AI Program, play a critical role in
supporting startups by providing accessible and non-dilutive
funding for research and development (R&D) purposes. Despite
facing significant challenges since the start of the war in Gaza,
Israel has continued to produce cutting-edge technologies that are
getting the attention of global markets. Additionally, Israel's
highly skilled workforce and partnerships with academic
institutions provide a steady supply of talent to meet the
sector's demands. With innovation, resilience, and
collaboration at its core, the Israeli AI landscape is poised to
remain a global force in 2025 and beyond.
- Mergers and acquisitions to remain a cornerstone of
deals. According to IVC Research
Center, 47 Israeli AI companies successfully completed exits in
2024, showcasing the global demand for AI-driven innovation.
Investors are continually identifying the differences between
companies whose foundations were built on AI, versus those
leveraging AI to enhance other core elements of their value
proposition—sometimes only marginally. Savvy buyers look
beyond the "AI label" and seek out companies with
genuine, scalable AI solutions rather than superficial
integrations, understanding that value lies in robust and
transformative applications. AI is also sector agnostic and may
disrupt virtually every vertical. From health care and finance to
retail and manufacturing and others, numerous industries are
increasingly leveraging AI to enhance or even change their core
competency to gain competitive advantages. Deals in this space are
coming from strategics such as automobile manufacturers, banks,
digital marketing companies and life science firms, among others.
As AI continues to permeate multiple sectors, Israeli companies are
poised to receive increased attention from strategic M&A buyers
looking to unlock new technologies and business opportunities in
the market.
- Intersection of PropTech and AI to further
revolutionize the global real estate industry. Israeli
innovation is expected to be at the forefront of this trend.
According to IVC Research Center, over 70 PropTech companies
headquartered in Israel are leveraging AI to develop cutting-edge
technologies that are reshaping the industry on a global scale. We
anticipate these companies will continue advancing AI-driven tools
and third-party solutions to streamline acquisition strategies,
enhance underwriting processes, and drive operational efficiencies.
By harnessing AI to identify leasing opportunities, forecast rental
trends, and optimize costs, Israeli PropTech firms are set to
solidify their position as global leaders in real estate innovation
in the year ahead.
- AI to become increasingly important across global
industries. Israeli companies have demonstrated genuine
thought/R&D leadership in AI innovation. Some of the AI-centric
legal trends that may stand out in 2025 include (1) a greater focus
on data rights management as Agentic AI continues to carve new
learning standards; (2) regulatory advancements in science,
highlighted by two AI-related Nobel Prizes in science, that will
likely materialize in the U.S. Food and Drug Administration
adopting new rules for AI-driven drug approvals, as well as new AI
patenting standards and requirements; (3) greater emphasis on
responsible AI usage, particularly around ethics, privacy, and
transparency; (4) the adoption of quantum AI across many
industries, including in the area of securities trading, which will
likely challenge securities regulators to address its implications;
and(5) turning to AI-powered LegalTech strategies (both in Israel
and in other countries). Israeli entrepreneurs are likely to
continue working within each of these industries and help drive the
AI transformation wave.
- AI-based technology to continue changing how companies handle recruitment and hiring. While targeted advertising enables employers to find strong talent, and AI-assisted resume review facilitates an efficient focus on suitable candidates, the use of AI to identify "ideal" employees and filter out "irrelevant" applicants may actually discriminate (even if unintentionally) against certain groups protected under U.S. law (for example, women, older employees, and/or employees with certain racial profiles). In addition, AI-assisted interview analysis may inadvertently use racial or ethnic bias to eliminate certain candidates. Israeli companies doing business in the United States should not assume their AI-assisted recruitment and hiring tools used in Israel will be permitted to be utilized in the United States. Also, Israeli companies should be mindful of newly enacted legislation in certain U.S. states requiring companies to notify candidates of AI use in hiring, as well as conduct mandatory self-audits of AI-based employee recruitment and hiring systems. AI regulation on the state level in the United States is likely to increase, and Israeli companies that recruit and hire in the United States will be required to balance their use of available technology with applicable U.S. legal constraints.
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