Despite widespread predictions of a downturn, the climate technology sector demonstrated remarkable resilience in 2025, with venture capital investments holding steady in the U.S. and Europe. This unexpected stability defies earlier forecasts that suggested a cooling, or even a "death," of climate tech amidst shifting political landscapes and economic pressures. As the industry looks ahead to 2026, a diverse group of investors points to the escalating energy demands of artificial intelligence and data centers as a primary, though not exclusive, catalyst for continued growth, alongside a broader maturation of clean energy solutions.

Defying the Forecasts: Climate Tech’s Unexpected Strength

The narrative around climate tech in recent years has been one of fluctuating optimism and caution. Following an initial "Cleantech 1.0" boom in the early 2000s that saw significant capital deployed into nascent technologies, often without immediate commercial viability, the sector experienced a painful bust. Many ventures failed, leading to investor skepticism and a more conservative approach in subsequent years. However, a "Cleantech 2.0" emerged, characterized by greater technological maturity, lower costs for renewables, and more sophisticated business models.

The Biden administration’s landmark industrial and climate policies, particularly the Inflation Reduction Act (IRA), injected significant momentum into the U.S. climate tech landscape, offering generous tax credits and incentives for domestic manufacturing and deployment of clean energy. Similarly, Europe’s Green Deal aimed to position the continent as a leader in climate action. Yet, 2025 saw a perceived softening of political resolve, with President Donald Trump and the Republican Party signaling intentions to roll back some of these policies, and the European Union reportedly easing off some of its more ambitious environmental targets, such as the 2035 ban on new internal combustion engine cars. These political headwinds, combined with broader macroeconomic uncertainties, led many to anticipate a contraction in climate tech funding.

Instead, venture capital deployment in the sector remained largely flat compared to 2024, according to data from CTVC. This resilience is attributed to a confluence of factors: the undeniable and escalating threat of climate change, which continues to drive innovation and demand for solutions; and, crucially, the increasing cost-competitiveness and technological superiority of many climate technologies over their fossil fuel counterparts. Solar, wind, and battery storage, for instance, have seen incredible cost reductions over the past decade, shifting them from niche alternatives to mainstream, economically viable power sources. This fundamental shift provides a compelling economic rationale for continued investment, regardless of short-term political fluctuations. As Daniel Goldman, managing partner at Clean Energy Ventures, observed, "Zero-carbon generation is already among the cheapest sources of power, and growing demand for both grid-scale and distributed batteries is accelerating cost reductions faster than expected."

The Unstoppable Demand: Data Centers and AI’s Energy Thirst

The year 2025 cemented artificial intelligence’s insatiable appetite for electricity, transforming data centers into critical infrastructure components at the heart of the climate tech conversation. Investors surveyed were nearly unanimous in their expectation that data centers will continue to be a dominant force in 2026. Tom Chi, founding partner at At One Ventures, highlighted their unique economic ecosystem, stating, "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." Po Bronson, managing director at SOSV’s IndieBio, echoed this, noting the "ever increasing concentration of effort and focus on data centers virtually every single day in meetings, especially with corporates."

This surge in demand, however, is beginning to evolve. While 2025 was largely about securing any new source of power, 2026 is anticipated to shift focus toward resilience and decoupling from the traditional grid. Lisa Coca, partner at Toyota Ventures, believes "The 2026 data center energy conversation is likely to shift from demand to resilience and the need to accelerate plans to decouple from the grid." This strategic pivot aims to address growing challenges, including resistance from grid operators and the public, who are increasingly concerned that the immense new loads from AI are driving up local electricity prices and straining existing infrastructure. The cultural impact of data centers is becoming a palpable issue, leading to NIMBY (Not In My Backyard) pushback in communities grappling with the size, water usage, and perceived cost implications of these massive facilities.

Despite these challenges, the fundamental need for power persists. Investors anticipate that a broad array of clean energy sources—geothermal, nuclear, solar, and batteries—will benefit from this boom. Some investors, like Andrew Beebe, managing director at Obvious Ventures, acknowledge the potential for a "data center build-out bubble" to burst in 2026 or early 2027. However, he differentiates this from the underlying demand for electricity, asserting that "We still need a LOT more power, and we’ll use that — no build-out bubble there…yet." Kyle Teamey, managing partner at RA Capital Planetary Health, adds that even if a bubble were to burst, "The spending for 2026 is already budgeted. The train has left the station." This suggests that infrastructure plans are largely locked in, at least for the immediate future.

Powering the Future: A Diverse Energy Portfolio

The quest for reliable, clean power sources is fueling significant investment across the energy spectrum. Nuclear fission, once largely sidelined due to safety concerns, regulatory hurdles, and high costs, is experiencing a remarkable resurgence. In late 2025, nuclear startups secured over $1 billion in funding across several rounds, sparking speculation about potential public offerings in 2026. "Nuclear everything is in vogue right now," noted Teamey. This renewed interest is driven by nuclear’s promise of firm, dispatchable, carbon-free baseload power, which is particularly attractive for energy-intensive operations like data centers that require constant, uninterrupted supply. While large-scale nuclear plants have long development timelines, the emergence of Small Modular Reactors (SMRs) and advanced reactor designs aims to shorten deployment and reduce costs, potentially making nuclear a more agile solution in the coming decade.

However, nuclear power will take time to significantly impact electricity demand. In the interim, solar and batteries remain crucial, rapidly deployable options. Grid-scale batteries, in particular, saw record deployments in 2025. The development of alternative battery chemistries, such as sodium-ion and zinc-based systems, promises to further reduce costs and accelerate adoption by offering lower-cost, more abundant material alternatives to lithium-ion, thereby enhancing supply chain resilience. Leo Banchik, director at Voyager, expects "growth in 2026 with new plays on [battery] chemistry and business models," emphasizing a more disciplined approach to scaling gigafactories compared to earlier ventures.

Geothermal energy is also poised for significant expansion. Enhanced geothermal systems (EGS), which involve injecting fluid into hot, dry rock to create artificial reservoirs, are increasingly viewed as a mature technology ready for larger-scale deployment. Joshua Posamentier, managing partner at Congruent Ventures, predicts that "Geothermal will be hot on solar’s heels in terms of new generation," suggesting it will grow "geometric" compared to the linear growth of natural gas assets. Geothermal offers the advantage of continuous, baseload power, unaffected by weather conditions, making it another attractive option for grid stability and industrial applications.

Rebuilding and Reinventing: Industrial Renaissance and Supply Chains

Beyond the immediate demands of data centers, investors are increasingly focused on a broader "reindustrialization" theme. Anil Achyuta, partner at Energy Impact Partners, forecasts this as a major theme, emphasizing the need to "rebuild supply chains for systems that require multiple components and complex flowsheets." This includes critical areas like robotics, advanced batteries, and power electronics. The push for reindustrialization is multifaceted, driven by a desire to strengthen domestic supply chains, address labor shortages through automation, and enhance national security by reducing reliance on foreign manufacturing for essential components.

Critical minerals are a prime example of this strategic focus. The extraction, refining, and recycling of minerals like lithium, nickel, cobalt, and especially copper, are becoming paramount. Laurie Menoud, founding partner at At One Ventures, highlights copper’s centrality, noting that "A single gigawatt of data-center capacity requires on the order of tens of thousands of tonnes of copper." The geopolitical concentration of copper refining, with a significant portion in China, underscores the urgency for diversified and domestic supply chains. Companies like Chemfinity, aiming for domestic metal refining at cost parity with China, represent crucial efforts in this domain. This reindustrialization has profound market and social impacts, creating jobs, fostering regional economic development, and reducing the carbon footprint associated with globalized, often energy-intensive, supply chains.

Modernizing the Grid: Software, Resilience, and Distributed Power

The sheer scale of new power demand, coupled with the increasing intermittency of renewable sources and the threat of extreme weather, is placing unprecedented strain on existing electrical grids. This has brought "grid execution" to the forefront as a critical investment category. Amy Duffuor, general partner at Azolla Ventures, argues, "The quiet winners are companies that make interconnection, planning, and deployment faster software, hardware, and supply-chain solutions that help utilities actually move projects forward." These technologies are essential for optimizing existing infrastructure, integrating new power sources efficiently, and improving grid reliability.

Resilience and adaptation are becoming overarching themes for 2026. Lisa Coca and Joshua Posamentier both emphasize their growing importance. Achyuta points to innovative applications like robots designed to bury electrical transmission lines more quickly and cost-effectively than human labor, which could significantly mitigate wildfire risks and enhance grid reliability. Matt Rogers, founder at Incite and Mill, suggests that consumers themselves hold significant power through "decentralized infrastructure solutions, including rooftop solar, energy storage, and distributed energy resources, like heat pumps and smart thermostats." He argues that empowering households with these solutions can provide a faster, more cost-effective path to managing increased capacity than building new centralized power plants. This reflects a broader cultural shift towards distributed energy resources, empowering individuals and communities to become active participants in the energy transition.

Public Market Prospects: Who’s Next?

The robust activity in the private climate tech market is generating anticipation for potential public listings in 2026. While not all investors offered specific predictions, a consensus emerged around nuclear and geothermal startups as prime candidates for IPOs or SPAC mergers. Fervo Energy, an enhanced geothermal startup that recently secured a $462 million funding round, was the most frequently mentioned name. The company, a leader in its sector, is developing a 500-megawatt project in Utah, which could serve as a template for future large-scale geothermal plants. Accessing public markets would provide Fervo with the substantial capital reserves needed to tackle ambitious, multi-billion dollar projects. Other companies in battery recycling, like Redwood Materials, and advanced nuclear, such as Commonwealth Fusion, were also cited as potential contenders, signaling a maturation of these capital-intensive sectors.

Emerging Horizons: Beyond the Megawatts

While data centers and large-scale power generation dominate the current discourse, investors are keeping an eye on a diverse range of other transformative trends. EV trucking, for instance, is poised for a significant breakthrough. Andrew Beebe of Obvious Ventures predicts that "One of the biggest pieces of news of 2026 is going to be the release and specs behind the Tesla Semi," anticipating it will revolutionize the logistics industry much like Tesla’s passenger vehicles did for automotive.

The convergence of AI with the physical world is another area ripe for innovation. Matt Rogers believes "We will see massive innovation where AI meets the physical world in 2026 on both the infrastructure and consumer app layers," foreseeing its impact across manufacturing, life sciences, and food systems. This suggests that AI will not only drive energy demand but also offer solutions for efficiency and decarbonization across numerous industries. Robotics, particularly functional robots designed for specific tasks rather than general-purpose humanoids, will attract significant funding to address labor shortages and enhance efficiency in industries from agriculture to waste management.

Finally, Po Bronson offers a counter-intuitive observation: "When investors finally get tired of a sector and come to the conclusion it won’t pan out, that’s when the real breakthroughs finally happen." This analytical commentary suggests that overlooked or out-of-favor sectors might be incubating the next wave of disruptive climate technologies, reminding investors to look beyond the immediate hype cycles.

A Dynamic and Evolving Landscape

The climate tech landscape in 2026 is shaping up to be dynamic and complex. It is characterized by an undeniable demand for clean, reliable power, driven significantly by the rise of AI. This demand is accelerating the deployment of mature renewable technologies while spurring a resurgence in nuclear and geothermal. Simultaneously, there is a strategic push for reindustrialization, supply chain resilience, and a smarter, more robust electrical grid. While challenges like permitting delays, grid congestion, and the need for innovative financing mechanisms persist, the underlying economic competitiveness of clean technologies and the increasing urgency of climate action continue to fuel investment. The year 2026 will likely be a pivotal period, defining not just the trajectory of climate tech, but also the broader future of energy and industrial development.