As AI transforms the tech industry, venture capital is flowing into deep tech startups building robots and semiconductors. Wen Hsieh, a hardware investor, recognized the AI boom would create demand for physical technology to power it and founded Matter Venture Partners in 2023 to focus on that bet. In 2020, venture capital firms invested $23 billion in deep tech, a category including robotics, space, quantum, and other hardware technologies.

So far this year, that number has grown to $90 billion, according to Pitchbook. Matter is announcing it has raised $450 million for its second venture fund to invest in early-stage hard-tech companies. The fund includes investors like ASML, Taiwan Semiconductor Manufacturing Company, and Kleiner Perkins, where Mr. Hsieh worked for 17 years.

Matter invests in six core categories: semiconductors, AI infrastructure, energy, robotics, advanced manufacturing, and quantum computing. Andreessen Horowitz is also growing its focus on physical tech, illustrated by its $1.1 billion Machine Age fund for AI infrastructure startups. Matter’s portfolio company Q.ai was acquired by Apple in January in a deal valued at $1.6 billion.