After a challenging start to the year, U.S. equity markets staged a historic reversal in Q2, turning early uncertainty into an AI‑fueled rally. In this memo, we break down what drove the rebound, how public and private software markets responded, and what we’re watching in the second half of 2025.
Here’s a preview:
- From uncertainty to momentum: After bottoming on April 8, the S&P 500 posted its 10th-largest rally since 1989, the VIX recorded its steepest collapse on record, and Nvidia became the first company to surpass $4T in market cap. As investors reentered U.S. markets, AI-driven stocks helped flip the index from -15% at its YTD low to +5.5% by the mid-year mark.
- AI pulls software higher: As markets rebounded sharply in Q2, AI-focused names like CoreWeave, Palantir, Cloudflare, and Snowflake led the charge, highlighting how investors are increasingly rewarding companies with clear, compelling AI narratives and momentum.
- Private markets concentrate: Global venture funding reached $103B in Q2, marking the first time since Q3 2022 with three consecutive $100B+ quarters. However, capital remained highly concentrated, with 37% of total investment going to just five companies, including Meta’s $14 billion investment in Scale AI.
- Liquidity improves: Announced tech M&A totaled $186B in Q2, the highest quarterly figure since Q2 2022, while IPO activity is picking up as strong performances from Circle (+168% on its first day of trading) and CoreWeave (which gained nearly 5x from its intraquarter low) could encourage others to test the waters.
- State of the SaaS Capital Markets predictions check‑in: We are on track with several predictions from our State of the SaaS Capital Markets report, including increased growth-stage activity, with Series C+ deals capturing 45% of total funding, and a rebound in M&A, as multiple $10B+ deals have already been announced this year. Other predictions appear less likely, such as an expansion in public SaaS multiples and a reacceleration in growth rates.