Climate tech investment holds steady as data center demand grows

Venture capital investment in the climate tech sector remained essentially flat relative to 2024, according to data from CTVC. Despite expectations of a downturn in the U.S. and Europe, the sector showed resilience. Investors surveyed by TechCrunch nearly unanimously agreed that data centers will remain at the center of the conversation in 2026.

Hyperscalers (large cloud providers) are driving this demand with capital allocations. Tom Chi, founding partner at At One Ventures, noted, “They are creating their own financial ecosystem, and there is enough actual momentum in current AI efforts that I don’t see the hyperscalers pulling back in 2026.” However, some investors urge caution regarding the sustainability of this growth. Andrew Beebe, managing director at Obvious Ventures, suggested the data center bubble might burst in 2026 or early 2027. Meanwhile, Kyle Teamey, managing partner at RA Capital Planetary Health, acknowledged that the AI bubble might burst in 2026, though he noted that spending for 2026 is already budgeted. This has prompted a shift in focus toward grid resilience. Lisa Coca, partner at Toyota Ventures, expects the data center energy conversation in 2026 to shift from demand to resilience and the need to accelerate plans for decoupling (disconnecting from the main electrical grid).

• Hyperscaler budgets: $50 billion to $100 billion allocated for power, chips, and infrastructure.
• Nuclear startup funding: Over $1 billion in announced rounds, as nuclear energy options gain traction.

This push for grid resilience is directing capital toward alternative power sources that can provide firm capacity (reliable, dispatchable power generation). Startups in the nuclear and geothermal sectors are emerging as candidates to go public via an Initial Public Offering (IPO) or a Special Purpose Acquisition Company (SPAC). Geothermal energy is also scaling up. Fervo Energy, an enhanced geothermal startup frequently cited as an IPO candidate, raised a $462 million funding round. The company is currently constructing a 500-megawatt development in Utah, which is expected to serve as a template for future grid-scale (large enough to provide power to the electrical grid) projects.

Why it matters

Investors indicate that while data centers will remain a central focus for climate tech in 2026, the conversation is shifting toward grid resilience, decoupling, and the potential for nuclear and geothermal startups to access public markets.